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Bouncing back after a bankruptcy may not be easy but it can be done. The most prosperous of the rebounders analyze their past shortcomings, chart a better route, then march full force into the future.
Erica Sandberg of creditcards.com shares 3 people who bounced back from bankruptcy to millionaires.
In 2013, more than 750,000 households legally escaped their financial obligations by filing Chapter 7 bankruptcy. The sense of relief that comes with unloading debt obligations is often tempered by feelings of failure. It doesn’t have to be the end of the line, though. For some, discharging debt was not the final destination, but a launching pad to a greater and more secure economic future.
Like Henry Ford and Donald Trump, the typical profile of those who bounce high after a trip to bankruptcy court is a resilient risk-taker who learns from the past. Here are just a few people who transitioned from the depths of economic despair to a soaring net worth. Everyone can learn a thing or two from their pre- and post-Chapter 7 experiences, they say — as do the experts who help the insolvent rise and shine.
Richelle Shaw: author, “The Million Dollar Equation“
Before declaring bankruptcy in 2003, Richelle Shaw had built and managed Colorado River Communications, a booming telephone business. “I loved it,” says Shaw. “It was a phenomenal experience.” She moved to Las Vegas, where she continued to expand the company. Soon, Shaw had plenty of cash, but stopped paying attention to the vital parts of the enterprise.
“I wanted to be the cool owner,” says Shaw. “The ‘let’s party, it will be great’ owner. But, ultimately, you can’t do that. We didn’t pay our bills; we went on vacation.” Then the tragedy of 9/11 shook the country, as well as the company’s customer base. Payments stopped flowing, causing the business to fall further behind. It wasn’t long before it was over $3 million in the hole.
To make ends — and payroll — meet, Shaw took out loans in her name. Still, her once-thriving company of 52 employees folded in 90 days.
Her lavish lifestyle also ended abruptly. She sold her spacious house equipped with a Jacuzzi, deluxe outdoor kitchen and acres of property, and moved into a rental home. “Talk about failure,” says Shaw. “Moving into that big house was my dream. I used to call it ‘the palatial estates.’ We had parties, barbecues, baby showers. This new house was dark. Nasty. Nothing. A backyard that was disgusting. There was no grass, just mud.” She was heartbroken and embarrassed.
By the time Shaw sought bankruptcy protection, she had more than $2.5 million in personal liabilities. “They allowed me to do a Chapter 7,” says Shaw. “I had nothing left, so there was nothing the creditors could get.”
Shaw, however, refused to give up: “I got back into the telephone business, but this time I targeted people who were credit challenged.” She knew how hard it was to get a phone with low credit scores, since she had just experienced it. To start the business this time, she borrowed no money and instead negotiated deals with vendors, asking for shared stakes. The strategy worked. Shaw rebuilt a million-dollar company, FreshStart Telephone, which was praised by the media for serving a needy population.
Her opinion about bankruptcy? “100 percent positive,” says Shaw. “It gave me a chance to breathe, it’s a way to go from failure and not worry. I could make money again and start over. I’m thankful and grateful. It’s not the end of the world. It’s only the end of the world if you keep those same habits.”
Shaw closed the phone business in 2008, and today teaches business owners to properly manage their cash flow, so they can avoid making the same mistakes she did. She is also the “Money Honey,” a regular personal finance expert for Las Vegas’ Fox 5 More Show. Importantly, Shaw walks the talk by living far beneath her means. Her car is 16 years old. “I will drive it until it stops,” she says. “I rent. I’m a single mom, and I take care of my mother. I just don’t spend money on the things I did before. I’m the classic millionaire next door.”
Michael Mack: Attorney, founder of a bankruptcy recovery foundation
Lawyer Michael Mack of Milwaukee had been a key figure in a large law firm, doing very well financially. Until, that is, “I invested in a business I had no business investing in,” he says. The company went south and Mack lost everything.
“I tried to negotiate my way out of the situation, and I would have succeeded but for one particular stubborn creditor,” says Mack. “As a last resort, I filed Chapter 7 bankruptcy in 1998. I thought my world had ended, and I stopped practicing law. I dropped out of life.”
He and his wife divorced, and he moved into a one-bedroom apartment. By day, Mack was a telemarketer; by night, he tended a local bar.
“I finally decided to turn my life around, although at the time I was not exactly sure where to turn and how to do it,” says Mack. He began fixing his damaged credit and … (read more about 3 Who Bounced Back From Bankruptcy to Millionaires)
