How to Emotionally Deal with Bankruptcy [Depression & Stress]

March 29, 2022 By Matt McKinlay

Many business owners and corporate officers I consult with are not prepared for the emotional effects insolvency (including filing a commercial bankruptcy) will have on their personal well-being.  Taking an insolvent company through a reorganization or liquidation is hard.  For owners, officers and key employees of the business, it comes with sleepless nights, strained relationships and a business that looks very different in the end.  I’ve helped several business owners through these difficult times, and while all make it through, some do so with more grace and poise.

The purpose of this article is to explore several healthy strategies that have helped business owners and officers survive the emotional effects of bankruptcy. 

  1. Manage expectations with your loved ones.  Several studies show a strong correlation between bankruptcy and divorce.  Marital failures in a business crisis usually come because of a loss of household wealth through an unsuccessful turnaround.  Relationships with loved ones can be strained while navigating the pressures of an insolvent company.  For your relationships to survive, you and your spouse should agree on what you will and will not do during the next several stressful months of your life.  You may need to agree that you will need to work longer hours over the next several months.  Set expectations that you may not be yourself while faced with the pressures of laying off staff and making other agonizing decisions.  You may need to agree to a new personal household budget that reduces lifestyle and spending habits (see item 4 below).  You should also agree on a back-up plan.  Through all of this, it’s important to keep your business crisis in perspective.  One business owner I consulted with said, “my creditors may take my car, my house and my financial success, but they can’t take away my relationship with God or my wife.”  This is sage counsel that helped him effectively bounce-back from a failed business. 
  2. Exercise – Participating in physical activity for at least 30 minutes each day can help you maintain your health during this stressful time. It also gives you the opportunity to focus your mind on other things, relieve any stress you are experiencing, and help you feel happier overall.
  3. Set new goals – Owners and officers of insolvent companies usually need to rethink professional goals and reestablish ideas for new businesses or careers.  Starting over or managing a restructured business that looks different will be difficult.  However, setting new attainable personal goals will provide motivation and purpose to move forward and grow again. Your goals can change and increase over time.  Start small and celebrate successes along the way.
  4. Prepare a personal financial budget – It’s common for the personal financial well-being of many small business owners and officers to be tied to their business.  This can be incredibly stressful for business owners who may be at risk of losing their salary, draw, or who may be personally obligated for the company’s debts.  Take the time to review, prepare and/or adjust your household budget to prepare for a difficult time.  If you have a family, involve your spouse and children in this exercise.  Agree on expenses to cut, assets to sell1, and ways to bring in additional income.  In my experience, business owners that file a bankruptcy usually bounce back and restore their full earnings within three to four years.
  5. Don’t walk away too early! – Many business owners and officers are tempted to “throw in the towel” and leave the business to another person (or officer of the court) to manage during times of insolvency.  Unless you have lost credibility with your creditors, don’t give up.  I’ve observed that business owners who remain committed and engaged in the business through times of insolvency fare much better both financially and emotionally.  Show your creditors you are willing to help recover as much as you can, and that you are managing the business with their interests in mind.  You’ll stand taller and sleep better as you do.
  6. Seeking Emotional Support Services – It isn’t uncommon for people to experience feelings of stress, anxiety, depression, and failure when going through a bankruptcy. If you or someone you know is struggling to cope with feelings of depression during a bankruptcy or show signs of being suicidal, find emotional support services in your area or call the suicide prevention hotline for help.

Managing a business through an insolvent time is hard. It is financially and emotionally draining.  But it also provides a unique opportunity to learn from mistakes, bounce back and evaluate life’s priorities.  

If your company (or your client’s company) is in the zone of insolvency or bankruptcy  and you dread the sleepless nights to come, call Amplēo.  Its turnaround professionals will guide you through the process, help you avoid pitfalls and give you tools to thrive financially and emotionally.


1Selling or transferring personal or business assets during times of insolvency should never be done without the advice of qualified legal counsel.

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