I’m a Debt Counselor … and I Filed for Bankruptcy


filing for bankruptcyIn our Money Mic series, we hand over the podium to people with controversial views about money. These are their views, not ours, but we welcome your responses.

Today, a debt counselor and financial adviser shares how, while solving his clients’ financial problems, he mismanaged his own money to the point of bankruptcy.

There are certain times in your life you remember in stark detail. Your first kiss. The first time your heart was broken. Where you were on 9/11.

One of those days for me was the day I had to tell my wife that we needed to file for bankruptcy. That we would have to give up our three-bedroom home. That we had to break our lease with Infiniti. It wasn’t the actual moment when I filed for bankruptcy—that was just a jumble of papers, numbers and black-and-white print—that left an indelible imprint on my brain.

No, it was the expression on my wife’s face when I broke the news. Shock, disbelief, anger, panic all flitted across her face, before she paused, gave a little laugh, and said, “Dave. That’s not funny. There’s no way you would need to file for bankruptcy.”

Sadly, she was very, very wrong.

She completely trusted me with our financial dealings, as I, a professional debt counselor, was the “expert.” Surely, who would be better qualified to handle the family finances, than the resident finance manager, who has seen so many people on the brink of financial ruin and helped them back onto their feet?

And I was good at my job too. I knew the many pitfalls of taking on too much debt, spending beyond your means, becoming overwhelmed with interest, losing jobs.

It’s easier, however, to see other people’s shortcomings and how to fix their issues. I was blind to—or at least myopic about—our struggles in a way that I’m sure another financial adviser would have spotted immediately.

What Went Wrong

Jennifer and I got married young, right out of college, both of us with student loans—to the tune of $40,000 altogether. Because we were young, we made poor decisions in the beginning, opting to pay for most things with credit.

It didn’t matter if we didn’t have steady jobs, or had incomes that supported our lifestyles—at the time, my wife worked at a local restaurant as a server making roughly $11.50 an hour plus tips. We needed new furniture, as we were just starting out, and we didn’t want the regular IKEA stuff, so we wound up buying an overabundance of expensive furniture, calling it an “investment.” If we got tired of one car, we’d quickly go out and get another. Trips to New York, Hawaii and Europe were a part of our lifestyle.

Growing up, money and frugality were never topics that were widely discussed in my family. I think that lack of clarity may have had a slight influence on my career choice, to pursue something unknown. I also think it led to my eventual financial downfall, as I never grew up saving money—I only learned how to teach others.

RELATED: New Home Syndrome: How Renovating Your Dreams Can Cost You

In two years or so, we had amassed at least $20,000 in credit card debt to go with our solid $40,000 of student loans and thousands in car loans. In the meantime, I had been slowly making deals with bigger and more renowned clients and taking on more responsibility as a freelance financial adviser.

Then Jennifer got pregnant, which put a halt to our jet-setting ways.

But now we need a house for our growing family, so we bought a smallish two-bedroom house outside of Los Angeles. We didn’t think we would need to upgrade immediately, but shortly after Sara was born, Jennifer was pregnant again, with Zoe. We thought we needed a bigger house at the time, but in retrospect, perhaps we could have done without. This was right after the economic downturn of 2008, so we sold our house at a massive loss—around $100,000, and turned right around and secured a mortgage for a three-bedroom house in a good school district in Pasadena, California.

It’s obvious to me now that we were doing everything wrong, that I was doing exactly the opposite of what I counseled my clients. Instead of paying down as much as possible on existing debts, I was paying just the minimum and going out and accruing more debt. Rather than immediately putting income into savings or retirement accounts, I was spending every last bit of my income to keep us in our lifestyle.

How did I not see that we were headed for financial disaster? Part of it was that I never adjusted to the mentality that we wouldn’t always have two incomes. With my mind so focused on other people’s finances, it was easy to wind up neglecting my own. After the birth of the girls, Jessica decided to stay home full-time (which I fully supported—the girls needed their mother to take care of them and not anyone else). We went from a dual-income family with no children to a single-income family with two children in what seemed like a blink of an eye, with two more mouths to feed and care for on top of our existing expenses.

RELATED: How We Spend and Save: 4 Dual-Income Families’ Budgets

Part of it was hubris as well. I was doing well in my practice and had amassed a sizable client base, which I thought would bring in more income than it did. I hadn’t fallen behind on any payments (at first), and yes, I thought that nothing bad could happen to me because I knew better; I was financially invincible. I thought I knew how to save myself before things got too bad.

  • pscilla

    Thanks for sharing this. It’s refreshing to see a post on LV about bankruptcy that isn’t completely damning. Good luck & keep up the good work.

  • Euphoria

    Thank u, really!
    This was so useful guys!!

  • KRW

    Wow, I really appreciated his honesty and being so candid about being a debt counselor who filed bankruptcy. Hoping he and his family find their way back!!

  • hoopdude

    A great, keeping it real, story!

  • Kelly

    Did anyone else notice that the wife’s name went from Jennifer to Jessica partway though the story?
    Interesting article otherwise

    • emerald127

      Yes I noticed that too. Made me wonder if the story was made up, just used as a reference for others.

      • LearnVestAnna

        Hi all,
        Thanks for noticing this editing error. We have corrected the copy.

  • nkdeck07

    What the hell was his wife thinking? I really have never understood the “head in the sand, let my spouse take care of it” approach to finances. My fiance has his masters degree in economics and I still have day to day input and know exactly where we stand. It just flabbergasts me that someone wouldn’t be at all concerned about their financial well being.

  • 2deuces

    Regardless of his education, training and work experience, it sounds like David was predestined to wind up in this situation. I don’t know what to learn from this. I don’t want to think that we are trapped in the patterns we learned in childhood.

  • David

    I enjoyed this story due to the fact that he was a so call professional. But he like many of us are only human and are prown to making mistakes. I admirer his honesty and wish him n his family the best.

  • leila

    please tell me you joking right! How could this happen to a debt counselor?..

  • Andrea Galvez

    So, he should have known better, but still over-extended himself. Now his wife is mad at him — but didn’t leave him — and they live in a smaller place. Sounds absolutely terrible (please hear the sarcasm). I am not sure what LV is hoping readers learn from him. He filed bankruptcy and got most of his debt forgiven. That’s not exactly taking responsibility for your actions.

  • Tania

    Great piece. I read a ton of personal finance material online and many commenters are extra critical of debt stories that involve someone who makes a fairly good income, has “bad” debt or should’ve known better. This article shows how having issues with debt is not so cut and dry with the only factors being income, life circumstances or knowledge. There is emotional, psychological and coping factors at play too. While knowledge of money matters can help, it is not the only reason someone does or does not fall into a destructive debt situation.