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Mental health, debt management, and bankruptcy prevention: Part 1

Your financial situation – including the amount of debt you carry, your credit score, and how close to filing for bankruptcy you are – often has a marked impact on your mental health. However, it is also possible for poor mental health to negatively impact your financial situation. A positive mental outlook is essential for effective debt management. Conversely, poor mental health can ruin credit and drive individuals to file for bankruptcy.

Your mood, and your ability to earn and manage money: What do they have in common?

The Journal of the American Medical Association (JAMA) conducted a study in Jan. 2006 that examined the link between depression and poverty. The study found that low income people were far less likely to be able to manage depression, and far more likely to have suicidal thoughts. Ability to respond to counseling and medication therapies was lower among low-income individuals enrolled in the study.

The JAMA findings are hardly surprising. Because low-income individuals often live paycheck-to-paycheck, debt management or credit score maintenance can become onerous burdens on the psyche of an individual who is already struggling to survive day to day. Not knowing how you’ll scrape together funds to make a payment on your housing – be it a rent or mortgage check – and not knowing where your next meal is coming from can contribute to a bleak life outlook.

Long-term poverty and financial distress can indeed worsen depression — and worse, can make cures elusive. After all, if you barely have the funds to pay for your food and housing, how will you ever be able to afford counseling, medication, and other strategies for overcoming depression? It’s not easy, and at Advantage CCS, our hearts go out to those low-income individuals who are attempting to triumph over debt and triumph over mental illness at the same time. Individuals suffering from depression, bipolar disorder, or mixed-mood disorders who already experience financial distress can get themselves into further debt and other financial pickles (some even file for bankruptcy). This is because the very symptoms of their illnesses prevent them from being fully able to practice debt management, credit score restoration, or smart housing budgeting. (Fortunately, there are ways to get the debt monkey off your back.)

The National Institute of Mental Health (NIMH) defines depression as a disorder interfering with daily life. The symptoms of depression include persistent low mood and noticeable changes in daily habits and functioning, including changes in appetite and sleep. Some affected individuals become unable to function in ways that are financially disastrous. For example, a depression sufferer might cut back on his or her work hours, or eventually stop showing up to work altogether. Lack of stable income can easily lead to severe debt problems, credit issues, and eventually, housing foreclosure or a need to file for bankruptcy.

A type of mental illness related to depression is called bipolar disorder. NIMH defines this as a mental illness with the primary symptoms comprised of noticeable shifts in moods. The two primary mood types are mania and depression. When depressed, a bipolar disorder patient might lack the energy to attend to necessary daily tasks. He or she might under-perform at work, resulting in loss of income or even termination. Or, he or she might lack the energy or desire to pay gas, electric, and telephone bills, resulting in late fee accumulations and ruined credit scores.

The other hallmark mood state of bipolar disorder is called mania. When manic, a bipolar patient can become overwhelmed with a rush of energy and good feelings. Patients describe this euphoria as pleasant – at first. Too soon, however, the consequences of a high mood can sink in. Some bipolar patients go on spending sprees when manic. Bills rack up, credit scores shoot down, and debt management plans are destroyed. Other bipolar patients work frenetically, chalking their increased productivity up to grandiose self-perceptions and heightened energy levels. They might neglect their bills, or they might make costly mistakes at work. Substance abuse is common during manic phases as well, according to NIMH, and these substance abuses can eventually result in job loss or failure to attend to financial needs.

Individuals with bad debt or ruined credit are more likely to suffer the symptoms of mental illness. Likewise, individuals with a predisposition to mental illness are more likely to suffer sever financial consequences. Part 2 of this Advantage CCS series will explore how you can practice debt management during a period of mental illness.

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