How Bankruptcy Helped Me Start Over After $60,000 of Debt

Summary: Filing Chapter 7 bankruptcy can eliminate unsecured debt like credit cards and medical bills, giving you a fresh start when debt payments exceed your ability to build wealth. Most people pay only a $338 court filing fee and see their credit recover within 1-2 years. Solo can help you respond to debt lawsuits while you explore bankruptcy options.

Drowning in debt with no way out? You're not alone. Every year, hundreds of thousands of Americans file bankruptcy to escape overwhelming debt and rebuild their financial lives. While many people view bankruptcy negatively, it's actually a legitimate financial strategy that can help you stop throwing money away on interest and start building wealth.

Ben Jackson, Co-founder of Upsolve, knows this firsthand. After struggling with $60,000 in debt from a failed small business, Ben filed Chapter 7 bankruptcy and transformed his financial future. Today, he's a homeowner, law school graduate, and helps thousands of people find freedom from debt through his nonprofit organization.

Recently, Ben joined The Debt Hotline podcast to share his personal bankruptcy story and answer real questions from people considering this option. His insights reveal why bankruptcy can be a smart financial strategy rather than a last resort.

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Bankruptcy can make more financial sense than struggling with debt

Many people assume they should exhaust every option before considering bankruptcy. But Ben's experience shows that sometimes filing sooner rather than later makes the most financial sense. He explains:

"I spent probably about three years struggling with about $60,000 in credit card debt, just making those payments. The thing that I would really encourage you to do is figure out the dollar amount that you're paying in interest and principal."

Ben discovered he was paying more in monthly interest than his actual living expenses. His debt was growing faster than his income, despite working 80+ hours per week driving for Uber and Lyft while trying to build his business.

The turning point came when Ben calculated the opportunity cost of debt payments. Money spent on credit card interest at 20-30% annual rates can't be invested in index funds or used to build wealth. Over time, this difference compounds dramatically. For example, Ben shares:

"If you take $10 starting in your twenties and you put that into a standard index fund in the market, you end up in your fifties and sixties with something on the order of $140,000. Even if you stop putting money in at age 30."

Ben realized he was working harder than ever but getting nowhere financially.

Let's consider an example.

Bonnie earns $80,000 annually but has $65,000 in credit card debt from a messy divorce. Her minimum payments are $1,800 monthly, leaving little for savings or emergencies. Even aggressive payment plans would take 15+ years to pay off with interest. Chapter 7 bankruptcy eliminates the debt in 6 months, allowing Bonnie to rebuild her savings and plan for retirement.

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Chapter 7 eliminates debt while Chapter 13 creates payment plans

Not all bankruptcies are created equal. Understanding the difference between Chapter 7 and Chapter 13 can save you thousands of dollars and years of payments.

Chapter 7 bankruptcy eliminates most unsecured debts completely like credit cards, medical bills, personal loans, and old utility bills. The process usually takes 4-6 months, and you're left with a clean slate to rebuild.
Chapter 13 bankruptcy puts you on a 3-5 year payment plan to pay back creditors. While this might sound more responsible, the statistics tell a different story.

"What tends to happen with Chapter 13 is people never actually end up paying off their debt. The plan fails and so they end up right back where they started. If I had had $6,000, I wouldn't have been trying to file bankruptcy in the first place. There's no way I would've been able to keep up with that payment plan."

Ben almost fell into this trap himself. When he first met with a bankruptcy attorney, they recommended Chapter 13 with $6,000 in attorney fees and a payment plan he couldn't afford.

Instead, Ben filed Chapter 7 on his own for just the court filing fee, which was around $395 at the time (now $338, often waived for low-income filers).

Bankruptcy affects your credit less than you might expect

One of the biggest fears about bankruptcy is credit damage. But Ben's experience shows the reality is often better than people expect, especially if your credit is already suffering from missed payments and high balances.

Ben entered bankruptcy with a 720 credit score since he'd been current on payments. After filing, his score dropped about 80 points to 640. Within a year, he was back to his original score. He shares:

"For most people who come to Upsolve, their credit score is already in the tank. They're down in the low to mid-500s. Those scores have had much of the damage already done. If you're in that position and you file, you're not going to experience much negative on your credit and you are going to experience a pretty quick positive boost once all that bad debt goes away."

The key is that bankruptcy removes the negative factors dragging down your score: high balances, missed payments, and collection accounts. Once these disappear, your score can recover quickly with responsible credit use.

Your assets are protected in most Chapter 7 cases

A common misconception is that bankruptcy means losing everything you own. In reality, state and federal exemptions protect most assets that people need for daily life.

Protected assets typically include:

Your primary residence (up to certain equity limits)
One vehicle per person
Clothing and household goods
Retirement accounts like 401(k) plans
Tools needed for work
Basic personal property

"Generally speaking, there's not a lot of risk in filing Chapter 7 bankruptcy if you don't have a lot of assets," Ben notes. "The exemptions more than cover their assets, meaning they don't lose anything in a bankruptcy unless they own a house or a really expensive car."

Even retirement accounts remain protected. When asked about using 401(k) funds to pay off debt before bankruptcy, Ben warns this can actually create problems.

"If you pay back a debt and it looks like there's any sort of preference, meaning that you paid it to one company and not another, it can make your bankruptcy harder," Ben explains. "Often it's better to take a look at your options through bankruptcy first."

Bankruptcy stops lawsuits and wage garnishments immediately

One of bankruptcy's most powerful features is the automatic stay, a legal protection that stops all collection activities the moment you file. Ben emphasizes:

"As soon as you file, there is a stay that goes in place on collections, meaning that debt collectors can no longer call you and typically any debt lawsuit that's in action just halts.”

This protection is crucial for people facing multiple lawsuits or wage garnishments. However, timing matters significantly.

If you're currently being sued for debt, responding to the lawsuit should be your first priority, even if you plan to file bankruptcy later. Using Solo to file an Answer document protects your rights and maintains your negotiating position while you explore all options.

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These bankruptcy mistakes can derail your case

Based on Ben's experience, here are critical mistakes to avoid:

Don't wait too long. Many people struggle for years trying to pay off debt that bankruptcy could eliminate in months. The opportunity cost of this delay can be enormous.
Don't assume you can't afford to file. Chapter 7 bankruptcy costs only the $338 filing fee, which can be waived for low-income filers. Organizations like Upsolve provide free tools to file without attorney fees.
Don't hide assets or income. Bankruptcy requires complete honesty about your financial situation. Attempting to hide assets can result in fraud charges and case dismissal.
Don't pay certain debts before filing. Paying back friends, family, or preferred creditors within 90 days of filing can be considered "preferential transfers" and complicate your case.

Bankruptcy creates opportunities for wealth building

Perhaps the most surprising aspect of Ben's story is how bankruptcy enabled him to build wealth rather than just escape debt. He reflects:

"It was literally like this chain that had been tied to my ankle was pulled off and I could walk, run, even fly forward and actually start building the life that I wanted."

Without debt payments consuming his income, Ben could afford law school, invest in his future, and eventually buy a home. The money that would have gone to credit card companies for decades instead built his career and assets.

This wealth-building aspect is often overlooked in discussions about bankruptcy. When you're free from high-interest debt payments, every dollar you earn can work for you instead of against you.

Take action before debt overwhelms your future

Ben's transformation from debt-stressed to successful business owner and homeowner illustrates bankruptcy's potential as a wealth-building tool. His story shows that bankruptcy is about making a strategic financial decision to reclaim your future.

"I definitely wouldn't have gone to law school had I not been able to file bankruptcy," Ben notes. "I definitely wouldn't have ended up in the position that I'm in now where I work at a job where I get to help other people find freedom."

Whether you're facing multiple debt lawsuits, struggling with payments that exceed your living expenses, or simply want to redirect your money toward building wealth instead of paying interest, bankruptcy deserves serious consideration as a financial strategy.

For more detailed insights on Ben's bankruptcy experience and answers to specific listener questions, listen to the complete interview on The Debt Hotline.

Solo's tools can help you respond to debt lawsuits properly while you explore all your options, including bankruptcy. Don't let debt collectors win by default while you're making important financial decisions about your future.

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