As an avid trail runner, hiker, car-camper, and traveler, I’ve had many occasions to visit the finest of the small, charming, “Ma and Pa” type establishments that are scattered across the western United States. It was on one such trip—traveling northward to run an extensive portion of the Pacific Crest Trail—that I finally allowed my mind to be fully consumed with a fantastical dream that I believed I could turn into a reality: opening my own coffee shop. After all, I’d just spent the better part of a week traveling through America’s coffee belt, and there was something about the experience that had inspired me to grab a pot, a kettle, and some free-trade beans, and really make a go of it back in Utah. All seemed well for the first few business quarters; I was constantly stressed and stretched thin, but I felt fulfilled working for myself and making a product I believed in and wanted to share with the public.
I tried to do everything right: I decided to pay myself with a “draw” rather than a salary, I made sure to hire the best employees who’d deign to work for me (who really turned out to be much more like family, despite the difficulties that would plague us for the first few years), and I invested in plenty of community events and local ad campaigns to get the word out about our sumptuous and positively sinful blends of traditional caffeinated coffees, as well as our decaffeinated confection-like cocoas for the less than latte-minded. However, the timing for me was all off. I had started planning for the business in 2006: right before the major financial crash. I eventually had to read the writing on the commercial espresso maker and hang up my kitsch apron and hair net. Because I was also the sole proprietor of my company, I had one last bean to grind, too: filing for Chapter 7 bankruptcy.
Shame, Shame, Shame
Honestly, the shame that accompanied the failure was much more debilitating than the failure itself. Had it not been for an excellent court-appointed trustee that walked me through the process as they dutifully sold off my company’s assets to pay back my creditors, I might have even been emotionally crushed under the weight of it all. Unfortunately, our culture’s “pull-yourselves-up-by-your-own-bootstraps” culture promulgates the idea that anyone who makes a financial mistake—even dedicated and driven small-business owners who’ve suffered a significant financial setback—should be condemned by the public at large for having to file, and then attempt to rebuild themselves from the ashes. However, as my financial advisor informed me, I was using bankruptcy exactly as it was designed to have been used. The law permits us a fresh start after we get in over our head financially. It took me a while to fully understand that there was no “bankruptcy clause” that said that I somehow needed to earn the approval of all of my friends, neighbors, and entrepreneurial peers to be permitted back into the public sphere. Soon enough, I decided to ignore any cruelly wagging tongues and persevere, full of hope for the future. With the help of proper financial planning, I regained my personal solvency, and began to engage with my community as an entrepreneur again.
Adapt and Overcome
The following are some tips for rebuilding your finances and credit after a bankruptcy:
- Restructuring your budget: carefully and painstakingly (with an expert preferably) attend to every detail of your new budget. Chances are, even though I had thought at the time that I’d done my due diligence, that I’d let too many expenses slip through the cracks.
- Consolidate Your Savings: save your first thousand, designate an emergency fund, and consult with an expert over your investments.
- Start rebuilding your credit: look over your credit report to the most minute detail.
- Start investing: the prospect of “getting back out there” can be daunting after a bankruptcy, and you shouldn’t invest in high-risk investment assets just yet focus instead on slowly and steadily growing your capital through asset-backed securities and mortgage-backed securities, two of the most important types of asset classes within the fixed-income sector.
Out of the Frying Pan…
As I rebuilt myself from the ground up after my Chapter 7 bankruptcy, I found that I was able to satisfy that “entrepreneurial” itch within myself by continuing to diversify my financial portfolio with varying investments, rather than by starting another small business. Amid the tumultuous seas of our current global pandemic, small business owners are probably afraid that the emergent economy might be too volatile for them to avoid bankruptcy, no matter how positive their attitude, and despite their incredible work ethic. The good news is that bankruptcy wasn’t the end of my financial story, and it won’t be the end of yours either—count on financial experts to guide you and just be ready to keep turning the page to the next chapter. You’ve weathered the storm, and you deserve your fresh start, and to take those steps with your head held high.