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How to Overcome Financial Failure

Financial failure can look like a bankruptcy, a failed business venture or many other outcomes. With the right approach, you can overcome financial failure.

April 21, 2022

This article is provided for informational purposes only and should not be construed as legal or investment advice. Always consult with a professional financial or investment advisor before making investment decisions.

Financial problems can stem from many different sources. We might lose a job, quickly burning through our savings. We might face an unexpected medical bill or other major expense. Or, we may slowly slip into financial ruin due to out-of-control spending or excessive debt. 

Sometimes, these problems can lead to financial failure — which often culminates in bankruptcy. 

Bankruptcy is fairly common in the United States, with 413,616 cases filed in 2021 (down from 544,463 cases in 2020).

But what happens when you file for bankruptcy? And how can you recover from bankruptcy or other serious financial problems? We’ll uncover all this and more. 

What happens when you file for bankruptcy?

You can declare bankruptcy if you believe you will be unable to repay your debts. 

Bankruptcy is a legal proceeding in which the court examines the assets and debts of an individual or company. The goal is to determine whether the debts are truly overwhelming for the individual or if the individual could feasibly pay them.

If the court sides with the individual, the debts can be “discharged.” This essentially means that the individual is no longer legally required to repay those debts. 

Debts may also be restructured through the bankruptcy process. This could include a change in repayment terms, interest rates or other factors. 

There are different types of bankruptcy — Chapter 7 bankruptcy, Chapter 11 bankruptcy, and Chapter 13 bankruptcy. 

For individuals, Chapter 7 is the most common by far, making up around 70% of bankruptcy filings in 2020. It’s also the most successful, with around 94.9% of Chapter 7 cases being successfully discharged in one 2020 study. 

What happens when you file for bankruptcy and select Chapter 7 proceedings? If your case is successful, your debts can be discharged. This means you’ll no longer be responsible for repaying those debts. 

Note that certain debts cannot be discharged, even through bankruptcy. This includes alimony, child support, certain unpaid taxes and certain types of student loans.

How long does bankruptcy stay on your credit report? 

Chapter 7 bankruptcy (the most common) stays on your credit report for 10 years. After that time, the bankruptcy will automatically be removed from your credit report.  

Why financial failure can feel so devastating

When we end up in a financial hole, we can feel hopeless and lost. 

If this is you, you’re not alone. 

Why do financial problems feel so devastating? A lot of this can be traced back to the perceived importance of money in our society.

When you think about it, a lot of aspects of our lives revolve around money. Like it or not, finances are closely entwined with most of our day-to-day lives. 

If you’re facing financial failure, it’s helpful to take a step back and remember that there are more important things in life than money. 

Society might try to convince us otherwise — but the reality is that who you are as a person is much more important than the balance in your bank account. 

How to overcome financial failure

Money can be a source of deep shame and anxiety. Most of us have made financial mistakes in the past. How can we move on from them?

The process will look different for everyone, but here are some guiding principles to help you — including some helpful advice from financial experts

Focus on moving on

It can be tempting to blame ourselves for our less-than-ideal financial situation. But even if we are to blame, it doesn’t do us any good to beat ourselves up about it.

“We all make mistakes in life, and sometimes those mistakes are financial. But rather than beating yourself up about it, you should use it as a learning tool. Just be sure to learn from your mistakes the first time you make them,” says Wes Moss, host of the "Money Matters" radio show.

Learn from your mistakes

We all make mistakes. The best thing we can do is learn from them and move on. 

Kyle Taylor, founder of the popular personal finance site The Penny Hoarder, had this to say:

“I've since learned from my mistakes," he said. "I learned to treat credit cards not as free money but as important tools in my financial journey.” "Building strong credit helps with lower interest rates, approval for higher credit limits, and better credit card rewards and insurance rates down the line.”

Move past limiting beliefs 

We all have limiting beliefs — false beliefs that prevent us from realizing our true potential. 

Those beliefs might take any number of shapes, including:

  • “I made a mistake once, so I’m sure to make similar mistakes again”

  • “I have a spending problem, and I won’t be able to fix it”

  • “I am a failure, so I will always be a failure”

  • “I don’t know much about money, so I will never understand it”

Recognizing these limiting beliefs is the first step towards overcoming them. When it comes to money, so-called “analysis paralysis” is a common thing holding people back. 

“It's better to dive in, even if you make a few bad choices along the way, than it is to sit on the sidelines worrying that you won't make the best possible choice,” said millennial money expert and author Stefanie O'Connell.

Get the help you deserve

"It's also helpful to bring in a third party to help analyze," says entrepreneur John Rampton. "This is the best way to gain a constructive perspective on your failure.”

Help can come in many forms. Here are some ideas. 

Talk to your friends and family to gain personal insights and feel less alone. Financial problems are more common than you might think — someone in your circle may have also faced bankruptcy, excessive debt, or other financial struggles in the past. 

Find a financial advisor that specializes in personal bankruptcy. An advisor can help guide you throughout the process, and help you set up a plan moving forward. If possible, look for a “fiduciary” financial advisor, because fiduciaries are required to act in your best interest. 

Find a financial therapist that can help you with the emotional and psychological aspects of financial problems. These counselors are trained specifically in helping people deal with the complex emotions involved with personal finance. 

Utilize the tools at your disposal

Finally, be sure to utilize the tools available to you.

This could mean reaching out to a friend or family member for advice or even for financial help. 

It could mean utilizing free money coaching or counseling, which is often available through local community organizations. 

Or it could mean consolidating credit card balances so you can pay less in interest. 

Tally† is an app that might be able to help. Tally helps qualifying Americans consolidate their credit card payments, helping them pay off their debts faster. 

†To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.