Depression and Addiction after Bankruptcy

By Stephanie Thomas

Couple with empty wallet
When a person files for bankruptcy, there are many emotions that accompany that action. Yes, bankruptcy allows people who are drowning in debt to, slowly but surely, catch their breath. For families facing foreclosure or a lawsuit, filing can offer welcome relief.

Still, bankruptcy doesn’t guarantee blue skies forever. The pressure endured before, during and after the filing process can sometimes lead a person on a downward spiral toward depression and even addiction, but it doesn’t have to.

Maybe you’re in a position where bankruptcy is inevitable. Or perhaps you’ve already filed and you’re straddling the line between feeling grateful for a fresh start and ashamed that you needed one in the first place. We want to help you move forward with confidence, avoiding negative feelings that could lead to the urge to self-medicate. Here’s how you can take those first few steps:

Recognize that you’re not alone in filing

Facts are facts. The numbers tell us that you’re not the only one in your community who required a Chapter 7, 11, 12 or 13 to get by. In 2016, just under 800,000 Americans filed for bankruptcy.1 With the latest population estimates, that number represents one in every 311 adults.2

You can bet there’s another guy at your work, lady in your church or parent at your kids’ school who just signed the same papers you did. Additionally, many more who filed in years past or will file in the future. Bankruptcy feels lonely because no one talks about it, but you can be sure others are experiencing it.

What to do with this information: Bankrupt isn’t a forever status. Even some millionaires have spent their early, not-so-wealthy days struggling to overcome major money hurdles like the one you’re currently up against.3 Take a page from their book as you work through your guilt and make a conscious decision to leave your shame behind, then commit to creating a solid money plan for the future.

Educate yourself on the emotional toll bankruptcy can take

Joseph Goetz, president of the Financial Therapy Association, uses the word “traumatic” to describe the extreme emotional effects that can occur when a family files for bankruptcy. Traumatic is a strong word, and it indicates the range of emotions and long-term effects that bankruptcy can cause.4 And although you may not want to acknowledge these difficult ramifications, simply being aware of them allows you to be more prepared when they come your way.

Here are some of the feelings you can anticipate:

Feelings of uncertainty – No one ever wants to file for bankruptcy, as it can be seen as the epitome of a last-ditch effort. Because of the tender and private nature of discussing financial trouble, actually talking about where you are and what you need to do next may make you feel nervous and unsure. Even as you move through and complete the process, you may hear whispers in your head that name-call and place blame.

Feeling overwhelmed – The paperwork, rules and regulations required by law may seem like a constant reminder that you’re not living the financial life you desire. As you look around at others, perhaps you’ll feel out of place and unsettled — like you’re stuck in a rut and unable to get out, even as bankruptcy helps to clear your plate.

What to do with this information: First and foremost, find a lawyer you trust, one who can help you sort through the benefits and drawbacks to filing for bankruptcy in your situation. If you’ve already filed and struggle to think positively about yourself, talk with a friend or counselor.

After all, as clinical psychologist and money expert Bradley Klontz explains, our net worth does not equal our self worth. And friends and family who love and support us are good reminders of this basic truth.3

Be aware of the reasons a person filing for bankruptcy may look to drugs or alcohol

Anytime we find ourselves in a vulnerable situation, we’re a bit more susceptible to developing unhealthy habits. This is true of the guy or gal who endures a tough breakup and meets someone new — someone who’s available and interested but not so nice. And this mentality can sometimes be true of a person who files for bankruptcy.

If you allow negative thoughts about yourself to fester — or worse, if you pretend like nothing happened — you may be setting yourself up for the possibility of trying drugs, overeating or downing one, two, three too many drinks at dinner on the regular.

To avoid walking this road, look out for the following tendencies:

The tendency to block all bad feelings – Drugs, alcohol and food provide temporary relaxation and the ability to act as though all is well. Substance abuse also allows a person to detach from hardship and feel normal, even if only for a moment.

The tendency to look for artificial means of happiness – Drinking, eating and even drugs are often seen as social activities that are best shared among friends and enjoyed with laughter. A person facing bankruptcy may draw energy from any supposed joy they can drum up.

What to do with this information: Search yourself for the above tendencies and consider whether your habits are moving in an unhealthy direction. If you’re eating more, drinking more or taking any drugs — -illegal or from a prescription that’s not your own — you need to get help today. Developing an addiction will only add to, not alleviate, your money woes.

1 How many people filed for bankruptcy in 2016? National Bankruptcy Forum, February 20, 2017.

2 Population estimates. United States Census Bureau, July 1, 2016.

3 Weaver, Rheyanne. How Can Bankruptcy Affect Your Mental Health? Empowher, Accessed October 27, 2017.

4 Bortz, Daniel. Surviving the Emotional Toll of Bankruptcy. U.S. News & World Report. January 18, 2013.