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avoid personal bankruptcy


The first of three articles on how to avoid personal bankruptcy, showing how my thinking changed from that of a man who was drowning to that of a man willing to trust God

I had read my church’s “Position Paper on Bankruptcy,” and agreed with it wholeheartedly. Based on their criteria, I believed that I qualified as an appropriate candidate for bankruptcy for the following reasons:

1- I was repentant of past sinful attitudes and poor stewardship decisions, and I was willing to make necessary lifestyle changes.

2- I was a self-employed person whose business had been failing because of economic conditions that were beyond my control.

3- I had made a sincere attempt to pay down my debt through Consumer Credit Counseling Service.

4- My creditors had been contacted and were unwilling to negotiate new terms to make it possible for me to pay my debt.

5- I had no other viable alternatives to increase my income or reduce my expenses, although I was still exploring those options diligently.

6- I still desired to pay all my legitimate debts. However, I questioned the legitimacy of debts to credit card companies, who, rather than being true lenders that encouraged their borrowers to pay down their debts, continued to raise interest rates, making it more and more difficult for borrowers to pay their balances off. After seven years of paying on a debt, the principal had been well paid off. Now, they were continuing to suck blood as long as their victim was willing to lie there and take it. It was time to end the leeching.

7- I agreed to continue counseling after the bankruptcy had been filed.

To give you some background, over two years earlier, I had met with a financial and business counselor for about six months; at the end of which time, I realized that all I had gotten from our meetings was how to do a budget, that I should never have gone into business for myself and that I should sell my car.

What the counselor had not understood was that I never sat down and said, “ I think I’ll go into business for myself.” As it happened, I had been laid off from my first job in Advertising. Before that, I had been a successful furniture designer. I decided to go into Advertising because furniture design had become predictable and not as creative as I had expected. Advertising was very creative; but a designer had to have a portfolio to get a job, and I, as yet, didn't have one. So I started freelancing, while continuing to look for work. The freelancing grew so quickly that I decided to give my business a name, Creative Sharks, and move it to Atlanta. That was in 1996.

For the first two years of Creative Sharks, I continued to look for a full-time job because I wasn’t sure this venture was really going to work. During that time, to fill the gaps in my income, I used my credit cards. I know now that that was a mistake.

But God seemed to have His hand on Creative Sharks. The first year I made $16,000; the second, $32,000; the third year, $64,000. I’m not superstitious, but I knew it was significant that every year the amount I made was divisible by 16. Especially when, in the years that followed, that phenomenon continued.

Unfortunately, by the fourth year, the recession had taken hold; so my business stopped growing. My income dropped and leveled off by the fifth year. By then I had gone back to using credit cards to fill in the financial gaps. As fast as I would try to pay my balances down, a crisis would occur, and I would go back to using them. A habit pattern was developing. I was praying to God; but in the back of my mind, I knew I could always fall back on my credit cards.

The summer of the fifth year of my business I took the Crown Light class, and, in the fall, the full version. (Crown is a class designed to help Christians learn to honor God in their finances.) That summer was when I started meeting with the financial counselor. By the end of the year, I had gotten into the habit of budgeting, and had decided to use Consumer Credit Counseling Service to help pay down my debt. But when the time came for the first automatic withdrawal, I had no money in the bank. I was broke.

I prayed to God. I told Him I was committed to not using credit cards again, to paying down my debt, and to learning to be a good steward. But I needed His help.

Two days before CCCS was due to withdraw the first payment from my account, God sent me a new client. I had never asked a client for money up front before; but this one insisted on giving me a down payment. It was enough to cover the first CCCS payment, and then some. For the next year and three months, I paid off 25% of my debt.

As the economy worsened, my new client found it harder and harder to maintain our relationship. So, one day, it abruptly ended. I didn't worry: I knew God would send another client to take his place. But that didn’t happen. I cried out to God, “Lord, if you want me to continue paying down my debt, please send me something to work with!”

I was used to God bringing my clients to me, so I had gotten out of the habit of networking. Now I had to learn that process all over again. I joined the Greater Atlanta Chamber of Commerce, started going to every networking type meeting I could find, and became a networking machine. I also started applying on line with creative temp agencies, creative search firms, headhunters - anyone who might help me get work or a job. I was doing everything I knew to do, including praying like crazy.

But, again, I wasn’t worried. I knew God had a reason for what He was doing, and that, one way or another, He would come through. I could see how He had started a process in my life and thinking that was leading me in a new direction in my career. Not a totally new direction, as He had done when I started my business, but a change in focus within my business. It was a way that I could use my gifts and talents more fully for Him.

In spite of the fact that I knew God was allowing this to happen, and that in the end I would be in a better place, I began to get discouraged. I just wanted to work. I love to work, even though I hate the financial aspects that go with it. If I had a financial manager or business partner, as my counselor had suggested, I would have been a lot happier. But after looking for seven years, I still hadn't found one. So I was left alone to drown in my own financial ineptitude. I needed help, but didn’t know where to turn.

In the mean time, the bills were piling up. After three months of failing to make my CCCS payments, I was dropped from the program. I wrote to my creditors explaining my situation. Most were sympathetic and seemed like they would work with me: except for American Express, who was aggressive and inflexible. They had a process, and they were going to stick to it.

I finally received a call from American Express’s collection agency, giving me an ultimatum. I told the lady on the phone that I had no money to pay with right now, but that I would surely pay them as soon as I was able. She advised me, in that case, to protect myself. I knew she meant that I should apply for bankruptcy.

I had never considered bankruptcy before. I had always just assumed that God would provide and I would pay off my balances, one way or another. But my means for paying them off had been eliminated, and now the wolves were at the door. Could it possibly be God’s will for me to entertained the idea of bankruptcy? Would it be right?

After I got off the phone with American Express, I remembered that there was a law firm near a friend’s office that specialized in bankruptcy cases. I had seen their sign every Thursday morning for the past several years on the way to my friend’s office for Bible study. I asked my friend if he knew anything about them, and he told me to talk with Mr. Washington, one of the owners.

I met with Mr. Washington. He was a pleasant fellow, who painted a picture of bankruptcy that, rather than appearing gloomy, seemed quite liberating. After that, I made an appointment with one of his lawyers, who turned out to be more practical and sobering, yet still encouraging.

My feeling about all this was that perhaps God had closed a door for me business-wise - not due to anything I had done, but to the economy - and had opened a window for me financially to receive some relief. He knew my heart: He knew I wanted to pay my debts. But He also knew I had been sinking deeper and deeper into a hole for which there seemed to be no escape. This may have been a way of giving me hope.

I think the reason for the Seven Year Sabbatical in the Old Testament, when all debts were to be cleared, was to restore hope to people who had become hopeless in their circumstances, because it also included releasing all bondservants. Does that mean those people weren’t praying or trusting God? Perhaps; but I think it was also because God knows the nature of people, that we are basically greedy and unforgiving; and that sometimes people need help in doing the right thing - the way Nehemiah assisted the nobles and officials in his day to do the right thing.

I know I have a weakness in the area of finances. I don’t think I have the mind to handle money matters the way many people do. It’s everything I can do to balance a checkbook, and it has taken an incredible amount of effort for me to keep a budget. It’s not that I don’t want to; but after ten minutes of looking at figures on a page, I start daydreaming. If it were problem-solving, I would enjoy it. But it’s bookkeeping! I think it has something to do with being creative. Most of the creative people I know are poor at dealing with the practical - or, bookkeeping - side of life.

That’s no excuse, I know. I’m still responsible for my own affairs. But this one may be some kind of thorn in the flesh sent to humble me. I will probably struggle financially for the rest of my life. One day, perhaps I will have someone in my life that can come alongside me in this struggle and lend a helping hand. But the Lord knew that my continuing to drown in a situation that just got worse, in order to line the pockets of a few fat cats who had managed to make extortion legal in this country, wasn’t going to help anybody. They had gotten their money, and then some. Perhaps now it was time to stop the bloodletting and move on.

Just as a side note: another reason I had thought that the Lord might want me to pursue bankruptcy - and this is purely conjecture - was that He knew that if I paid off my debt through CCCS, or some similar program, it might become a source of pride for me; that it might embolden me to try something even more risky, thinking I’d be able to handle that as well. That's the way I think: I’m drawn to problems because of the challenges involved. The more impossible the challenge, the more I like it. If I think I don’t have enough problems in life, I tend to create more, in order to have something to solve. I know it sounds crazy, but I’m a problem-solver. And that was really how I was looking at my financial difficulties: just one more problem to solve.

Waitsel Smith, August 1, 2003

From a letter to Jerry Schriver (elder, friend and Business Ministry Pastor at Perimeter Church) and Larry Smith (elder and friend at Perimeter Church)

Text and image © 2005 Waitsel Smith. All Rights Reserved.

For the next article in the series, "Before You Grab That Lifesaver...," click the link in the bottom right.

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