The High Cost of Bankruptcy: Your Mental Health

By Vladimir Gendelman, an EO Detroit member and CEO of Company Folders, Inc.

When a company faces bankruptcy, the owner actually faces several types of loss. There’s the obvious monetary cost, yes, but there’s another cost that can be much more devastating and last long after they recover financially: their emotional well-being.

As Rishi Khanna (the CEO of Texas-based technology consulting company ISHIR) can confirm, facing bankruptcy takes a serious toll on a person’s family life. He nearly lost his company in the wake of the 2008 recession. “Since I started taking no paycheck home,” he said, “I had to cancel planned family vacations, downsize, and sell off items we accumulated during the glory days to pay bills. I became financially dependent on my wife to hold the family together. This brought in undue stress to our relationship and pressure on her to keep her job.”

For Vladimir Gendelman (founder and CEO of Company Folders, Inc.), a close brush with bankruptcy deeply affected his role as a father. “I have a weekly tradition with my daughter where we go out for sushi and visit the bookstore,” he said. “It’s something we both enjoy, and I like having a reliable, consistent way for us to spend time together. But while the fate of my company hung in the balance, I had to cut expenses and stop purchasing books. As things got worse, I was worried I’d have to abandon the tradition altogether, and miss out on valuable quality time with my daughter that I’d never get back.”

Bankruptcy certainly affects entrepreneurs’ relationship with their loved ones, but the mere prospect of losing the company itself comes with plenty of grief. “Watching your company die seems painfully similar to watching a loved one suffer,” said Michael Hobbs, President of PahRoo Appraisal & Consultancy, which also struggled during the recession. “There were many days I didn’t know how I would make it, because my sense of being was tied up in my company.” A person’s business is often an integral part of their identity, so a fear of losing it is similar to a fear of losing a part of oneself. For that reason, those facing bankruptcy often suffer a blow to their self-esteem.

Additionally, they may even experience negative consequences to their health. “I suffered a great deal of insomnia,” said Gendelman. “I didn’t want to worry my wife, so there were even a few nights that I pretended to be asleep, when in reality my mind was racing with anxiety.” The stress and depression associated with financial struggles often serves as a distraction, which makes recovering from those struggles all the more difficult.

What’s more, those feelings won’t always subside after bankruptcy has been avoided. For some, a successful recovery from bankruptcy feels like a heavy weight has been lifted; the entrepreneur’s personal life and emotional state will gradually return to normal. But for others, the experience leaves an open wound that persists long after recovery.  “Honestly, I can’t say that my personal and family life improved,” said Hobbs. “I can’t help but wonder if it would have been easier to file bankruptcy and move on. Those I’ve spoken to said filing for bankruptcy was gut-wrenching, but it was also therapeutic, because the pain came to an end when the filing was complete. Fighting for survival is a vicious and cruel experience that has no obvious end in sight.”

Without a doubt, this is a major emotional challenge that business owners can’t always deal with by themselves. It’s vital to have a solid support system in place. That in itself can be a challenge; sufferers may be hesitant to lean on their friends and loved ones, especially if they’re already worried about being seen as a financial and emotional burden.

Fortunately, many mental health professionals offer services specific to helping people through the stress and struggles of loss—including the anticipated financial loss and loss of identity associated with the possibility of bankruptcy. Many of these services are available for a sliding scale fee or even free of charge from community mental health centers. There are also inexpensive self-help books, mental health podcasts, and other resources that can help those struggling with personal issues. Above all, when it comes to dealing with the emotional fallout of near-bankruptcy, business owners need to know that they’re not alone.

Do you have any advice for those facing bankruptcy? How should someone deal with these types of emotional challenges? Please share your thoughts in the comments below.