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.
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 even self-published a book called, "The Healthy Credit System." To promote it, "I ran ads in the local PennySavers and I sent out press releases. I started offering free credit workshops and then I would sell my system to folks who attended the seminar."
Eventually, Mack restarted his law career and resumed life as an attorney. While the compensation was excellent, his enthusiasm for the job was gone. Then one day he shared his career dissatisfaction with a well-to-do friend whose response was a firm, "Then quit!"
"He suggested I start my own law firm teaching people what I know about credit, debt and recovery," says Mack. "So that's what I did. The next morning I gave notice."
Since then, Mack has achieved wealth that he previously thought impossible. "I have a beautiful home; I take care of my kids. Sent my oldest daughter to Notre Dame."
More importantly, he understands the hurdles that financial problems bring on. In response, he started BankFound.com, an organization that helps people recover from bankruptcy, avoid getting scammed and become financially literate. "My passion is helping people who have declared bankruptcy," he says.
Slavica Bogdanov: Author, success coach
Serbia-born Slavica Bogdanov immigrated to the United States by way of France as a baby, then to Canada at 9, then to Fort Lauderdale, Fla., last year. While in Canada, she strived for financial independence, and her big idea was investing in real estate.
"At first I was lucky, and my business grew very fast," says Bogdanov. "But I made mistakes. I didn't attend to it as much as I should have." Tenants destroyed some of the units she owned. "I tried to have the building fixed up; I juggled to try to pull everything together." The cost, however, was beyond her capability and the bills piled up.
"I had to let go," says Bogdanov. "It was a very tough decision. I put my heart and my soul into it and had to admit it was a failure." In 2012, she filed for bankruptcy. Creditors claimed her assets, including her car and house.
Bogdanov grieved for two months. She even considered taking her life.
But she chose to start fresh. "I said this time, do what you're passionate about. There's nothing to lose, you've already lost everything! It can't get worse!" Buying and selling property was over, though. "Since I had no more credit, I couldn't borrow any money."
She decided at that moment to save a little of everything she earned. "My mental focus was building wealth, not repaying debt," says Bogdanov. To achieve that, she created a detailed budget using an Excel spreadsheet: "I looked at all my habits. I went on a financial diet. I changed everything because I was disciplined and determined."
Second, she set goals. "I planned for two weeks nonstop." Bogdanov went full force into writing, penning more than 15 self-help books on subjects ranging from weight loss to time-saving tips. She began a coaching business and now trains others to coach as well.
Bogdanov says she is grateful for the bankruptcy. Without it, she wouldn't have a lucrative and enjoyable career. With it, she learned to stay out of debt. "I have a credit card now, and I use it frequently, but only for very small amounts," she says. "I never have any due payments because I pay in full. My credit line was little, but they just offered me $5,000. I'm building my credit very fast."
"I'm doing really well," says Bogdanov. "I'm earning between $15,000 and $20,000 per month, and it's going up all the time. I'm saving and my net worth is great. Next year I'll be a millionaire."
Common denominators: The post-bankruptcy success secret
There's a certain personality trait that the most successful post-bankruptcy thrivers share and that's resiliency, says Keith Klein a certified financial planner with Turning Pointe Wealth management out of Phoenix.
"One of the key reasons people declare bankruptcy is they've taken a path of risk with the possibility of reward," says Klein. In such cases, losing the bet is always a possibility. But those who turn such losses around get up and get creative. "They say, 'OK, what else can I do? What can I do differently?' They have goals that they write down," says Klein. "Most also have accountability, someone who offers guidance. A friend, a father or some other figure they really trust. Many have coaches, professional mentors or financial advisers."
Bankruptcy attorney Nick Best, of Detroit Lawyers in Huntington Woods, Mich.., says he also sees the same reasons for a triumphant rebound after a debt discharge.
"Entrepreneurial types, they tend to see the bigger picture," says Best. "As soon as they put all their creditors on hold, they look a few years down the road. They were risk takers before and they still are afterwards. It's amazing what these people can do. It's really cool when you see it."