How Bankruptcy Saved One Single Mom’s Life & Gave Her A Fresh Start
We typically think of bankruptcy as something that happens when a person hits rock-bottom with their finances and can’t find a way out.
It is a last desperate resort to escape financial hardship and unsustainable debt.
The truth, though, is that bankruptcy is nothing of the sort.
It is not a process that signifies failure.
Instead, it is something you can use to achieve freedom and escape misery.
To date, the legal mechanism has helped thousands of people turn their lives around and get a fresh start.
Talking about bankruptcy in the abstract is very different from discussing how it improves the lives of real people.
Bankruptcy statistics are interesting, but behind each data point, there’s a story to be told.
Several years ago, CBC’s The Sunday Edition with Michael Enright ran a piece about a single mom called Kyla Hanington, who had been in dire financial straits before filing for bankruptcy.
Her experience illuminates why bankruptcy is such a vital legal mechanism and how it can help turn lives around.
Before the financial crisis, Kyla had found herself in a considerable amount of debt.
Her bank had encouraged her to take out credit cards, and she had been using it for her day to day expenses.
Eventually, the interest payments on the debt she owed became unsustainable, and she approached the bank for relief.
Seven times she tried to get them to reduce the 20 percent rate they were charging her down to something more manageable.
And seven times they refused, telling her to make at least a year’s worth of payments before considering her request.
To make matters worse, her mortgage lender decided to foreclose on the property that Kyla shared with her two children at the same time.
Even though she paid more than sixty thousand dollars towards the mortgage, she didn’t get to see the fruits of any of her hard work.
The bank told her to either get a new mortgage or cough up the cash to buy her home outright. Ridiculous.
Understandably, Kyla didn’t know where to turn.
Her creditors were putting her in an impossible position.
There was no way she could repay the money she owed, especially at 20 percent interest.
And now she risked losing her home too.
It was a nightmare.
She didn’t know what to do.
Eventually, she spoke with her employer.
Kyla explained to her boss how she felt utterly trapped and worried she wouldn’t be able to put a roof over her children’s heads.
She thought she had failed as a mother and was mentally preparing herself for life on the street.
Her boss reassured her and told her that she should speak with a debt counsellor to get more advice.
Kyla said, in hindsight, it was one of the best things that she ever did.
The credit counsellor immediately set about assessing her financial position, looking at things like her income and assets.
It quickly became clear that her situation was utterly unsustainable.
There was just no way that she could meet her debt obligations from her salary.
The banks had been taking her for a ride.
She then went to a licensed insolvency trustee who came to the same conclusion, suggesting that she immediately file for bankruptcy.
The trustee explained to Kyla that bankruptcy was the best option for her and that it could help her turn her life around.
Kyla quickly realized that she had spent years of her life trying to pay off unsustainable debts, never making a dent in them or building her wealth.
The banks had squeezed all of the productivity out of her, using it to enrich themselves while keeping her poor.
If it hadn’t been for debt, Kyla would have been on the road to financial success.
The moment Kyla started counselling sessions, she entered a protracted period of what she calls “stillness.”
Finally, after years of hardship and not getting anywhere, she had found friends who were going to help her get out of these difficulties and start anew.
She was a hard-working woman.
There was no reason she had to spend her entire life in servitude, repaying balances she could ill afford.
After hearing Kyla’s story and assessing her financial position, the trustee began filing for bankruptcy.
Kyla learned that bankruptcy would enable her to slash her payments to creditors and free her of all obligations in as little as 21 months.
After so many years of desperately trying to repay lenders, she was shocked.
Part of her couldn’t believe what she was hearing.
It seemed impossible that an option like bankruptcy had been available all along.
Kyla’s actions were like that of most people who get into financial difficulties.
She believed that she could dig her way out of her money problems by working hard and cutting her spending.
But a 20 percent interest rate is merciless.
If you miss a single payment, the interest compounds and, before long, there’s no way back.
Kyla was one of those who didn’t want to admit “failure.”
She continued striving long after she should have given up.
Filing for bankruptcy wasn’t a bad thing for Kyla – quite the opposite.
And the banks certainly weren’t missing out.
They’d received thousands of dollars on top of the money they originally lent Kyla.
They weren’t getting ripped off.
Soon after filing, Kyla discovered that there was life after debt.
Her repayments became much smaller and more manageable.
And eventually, she didn’t have to pay her creditors a penny.
Eight years later, she reflected on the episode and how it changed her life for the better.
Bankruptcy put her and her two children on solid financial ground.
It washed away the wreckage that was her former life and gave her hope.
Now she’s financially secure and living a dignified life without greedy creditors chasing her for payments she can’t afford.
Kyla’s story shows that using a licensed insolvency trustee is a route to freedom.
It is a tool that you can use to protect you from creditors and get a fresh start.