Leigh Anne Ely filed for bankruptcy when she was 28. She tried to file again in 2017 when she was 35. Bankruptcy ran in her family; her step sister filed once, and her dad, a professional accountant, has filed a few times.
“It’s really no big deal,” she said. “Filing bankruptcy doesn’t ruin people’s lives. At least not in my experience.”
Ely wondered if her family history played a subconscious role in her financial behavior.
She admitted she could have been better with money, but she also didn’t feel like she was entirely at fault for going into debt.
The ease of accumulating debt
Once out of high school, Ely did what she thought she was supposed to do. She obtained a full-time job, got a credit card and started to build credit.
She joined the Army for a few years. After her service, she got an administration and accounting job at a manufacturing company while she attended community college for an accounting degree using the G.I. Bill. It helped pay for school, but it wasn’t enough, so she borrowed an additional $12,000 private student loan.
At the same time, she took out an auto loan, and her life progressed in a way she felt was productive.
What Ely didn’t realize was that the way she was using credit invited more credit card offers, which she took. She carried large balances close to the limit and paid the minimum payments, or just a bit more.
“I thought I was being smart with credit, but really it was making me a creditor’s dream,” she said.
With multiple streams of credit, she accumulated around $8,000 in credit card debt.
Then an advertisement for a debt consolidation line of credit appeared. With little effort, Ely received a $16,000 deposit from Bank of America into her bank account.
“That was the downfall,” she said. “I paid off my credit cards, but then I kept the cards.”
Reflecting on the experience a decade later, she feels preyed upon by financial institutions.
“I didn’t seek that out. I got solicited as a young person having the life,” Ely said.
For many like Ely, it’s almost too easy to spend beyond your means before you know better. Rather than debt, it simply feels like, "I have this money, and people will give me more [as credit] for free,” she said. “I didn't have a good example to learn from.”
She paid around $600 a month to live in a gated apartment complex, went out on the weekends with friends and bought nice things. She worked an entry-level, $15-an-hour accounting job at a real estate office. She juggled a car payment, utility bills, credit cards and student loans. She thought that was how it was supposed to happen until it became too much.
“I thought I was being a good consumer. It was really a trap, and I couldn’t keep up,” she said.
The process of filing for bankruptcy
She couldn’t afford to make all her credit card and student loan payments anymore, so she stopped. After a few months, she finally decided to file for bankruptcy and found a lawyer through a friend. She met the lawyer, signed paperwork and after his fee, her $22,000 credit card debt was wiped clean.
The ease of the bankruptcy process surprised her.
Her student loans weren’t discharged in the bankruptcy. Instead, the remaining $9,000 went into collections after she defaulted. After two years, she settled with the collections agency for $3,000.
Until her bankruptcy and student loan settlement, Ely had always had credit at her fingertips. Now that was gone. Her credit score plummeted to the low 500s, and bankruptcy deemed her a credit risk for most lenders.
She was forced to change her spending habits, learn to live without excess and find the cheapest items to make do.
“I was eating oatmeal and canned pumpkin for two meals a day,” she said.
To her disbelief, she received more credit card offers shortly after filing for bankruptcy. The cards had high interest rates, annual fees and low credit limits.
“They were the worst ones you could ever have,” she laughed. “If you mess up, you’re going to pay lots of other fees, and it becomes a real bad cycle,” she said. But she wanted to rebuild her credit. “So I got more.”
She knew if she wanted credit, she was going to have to pay for it. She started small and got one credit card to rebuild her credit. For everything else, she was resourceful and relied on close friends and family. She asked her mom to co-sign an auto loan. She rented rooms from friends or found understanding landlords.
Within seven years, Ely accrued another $4,000 of credit card debt. She’d lost faith in the financial system and believed nothing bad would happen if she stopped paying them. She contacted a lawyer about filing bankruptcy again.
“He laughed because of the amount,” she said. With that, she decided not to file bankruptcy a second time.
Life after bankruptcy
While the bankruptcy didn’t bother Ely, it unexpectedly cast a shadow of judgement onto her.
She discovered that learning she’d filed for bankruptcy altered some of her friend’s perceptions of her. She recalled a “well-to-do” friend once telling her, “I have a different view of you now” when she found out about it.
Ely realized filing for bankruptcy meant something to her friend, while she felt it didn’t make her a different of a person; she had the same values and merits as she did before the bankruptcy.
“It is a mark that I have to live with, and I’ve chosen to let it flow off my back and not let it be an everyday stressor,” she said.
She acknowledges her nonchalance may be an uncommon luxury.
“A lot of people have long-term goals like family, houses, investments and retirement,” she said. “I don’t have those same goals, so it’s not a big deal to me to have these things hanging over my head at this point in my life.”
Ely is confident things will continue to work out. She doesn’t let the bankruptcy stop her from living the life she wants. She saved money and traveled around the U.S. as a WorldWide Opportunities on Organic Farms (WWOOF) volunteer for most of 2019 and has similar plans for 2020.
If she likes a place enough to stay, she’ll find another understanding landlord who will listen to her story, or room with a friend. She believes she will always find alternatives.
“I’m not having any problems living very close to the edge; a lot of people aren’t like that,” she says. “But maybe they are; it’s not the story that gets told.”