3 things I learned from bankruptcy

This guest post comes from Andrea Whitmer at So Over Debt.

I've posted about my experience with Chapter 7 bankruptcy several times, including a detailed explanation of how bankruptcy works. One thing I haven't done, though, is talk much about how that experience affected the way I look at my finances nearly six years later.

I wish I could say that the shame of bankruptcy instantly reformed me and changed my life, but unfortunately that's not quite how it worked out. In fact, it took four more years for me to really come to terms with my spending problem and make lasting changes.

Still, at this point I can look back and see lots of ways that Chapter 7 taught me various financial concepts. It just took a while for the lessons to sink in.

1. Financial problems are more widespread than you'd think. It was beyond humiliating to go tell an attorney that I'd racked up so much debt I couldn't buy groceries. I can't even describe how it felt to see my name in the newspaper under bankruptcies (and this is a small town, so everyone saw it). But I wasn't alone.

When my ex-husband and I went to court for our 341 hearing, we saw several people we knew personally. They were just as surprised to see us as we were to see them. I never would have guessed that those people were in such dire straits. One guy in particular had a VERY nice house and a high-paying job. That didn't make him immune to debt, though.

Today I try very hard not to make assumptions about a person's life (or bank balance) based on outward appearance. I didn't look like the "type" of person who would file for bankruptcy, but that didn't mean I could afford the lifestyle I was living. Bankruptcy can happen to anyone, and it can happen for a lot of different reasons. (Post continues below.)

2. You can keep most of your stuff in bankruptcy. People always have this fear of someone taking all their things away. I know I did! But the exemptions for personal property are more than generous. I didn't have to answer for a single purchase or give up any of the junk I'd bought on credit cards. While that sounds like a great thing, it's really not. It was like holding a "get out of jail free" card.

Don't get me wrong. I'm glad I didn't have to box up my clothes and furniture. I got to keep all the stuff I couldn't afford, AND I didn't have to pay for it! For a spendaholic, it was kind of like Christmas. And it made it all too easy to get more credit cards later, because I still didn't believe there were consequences for my habits. Then I got divorced and had to pay back all that credit card debt on one income, and let's just say it was a lot less fun at that point.

I haven't gone minimalist by any stretch of the imagination, but I do make an effort now to buy only things I need (or things I will use) instead of spending blindly for the five-second high of getting a new shiny object. So many of the things I bought back then have been sold in yard sales, brand new, for a fraction of what I paid for them. I don't ever want to go back to thinking I can have whatever I want.

3. You will never regret paying for something with cash. At the time of my bankruptcy in 2006, it was very rare for me to be able to pay for anything with my debit card. If I did, that usually meant using a credit card later anyway, to make up for what I spent out of my bank account. Even after the bankruptcy was discharged, I immediately started applying for new cards because the concept of living within my means was so foreign.

In late 2010 when I decided I was tired of playing catch-up all the time, I stopped using credit cards cold turkey. I just stopped one day. I was tired of rejoicing every time I had enough available credit to buy something else, then realizing I had no backup plan because all my money went to debt payments.

I do use credit cards occasionally now, but in a totally different way than before. Now I save up for what I want to buy ahead of time. When I have enough money, I buy it with the credit card, then pay the balance off as soon as it hits my card account. Strangely enough, I get as much gratification out of saving for things as I used to get from charging them.

And I spend a lot more time thinking about purchases: Do I really want to keep saving for this item, or should I put the money toward something else I want or need?

The aftermath: Better than I thought

As I said, my behavior really didn't change much at the time of my bankruptcy. The required "credit counseling" was a complete joke, and knowing the right answers didn't mean I was ready to put them into practice. But as the years passed and the real consequences of bankruptcy (ruined credit, limited housing options, worry about what I'd do without high credit limits to fall back on) became more apparent, it's amazing how much I was able to change.

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Filing for bankruptcy was a terrible experience, and I never plan to go through it again. But in a lot of ways, it was a good decision for me in the long run. At the time, the only alternative would have been a bailout from my parents or my ex's parents, which would have taught me nothing at all. So I'll take the delayed lessons over a lifetime of debt and overspending any day.

Have you ever learned an important financial lesson way after the fact? What did it take for things to change for you? What do you still need to work on?

More on So Over Debt and MSN Money:

• How bankruptcy works, Part Two
• Rebuilding credit after bankruptcy: 3 critical steps
• How bankruptcy works 
• 12 myths about bankruptcy
• Calculator: Do you have too much debt?
• When you're too poor for bankruptcy