Janet Lombardi shares her experience with bankruptcy after her husband drained their accounts and racked up debt to feed an addiction and hide business problems
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In this episode, author Janet Lombardi talks about being blindsided by her husband’s financial treachery that landed their family in bankruptcy court and destroyed their comfortable middle-class life in New York. In her book, “Bankruptcy: A Love Story,” Lombardi further expounds on the sex, drugs and financial infidelity that occurred in her relationship and the signs she missed that life wasn’t as it seemed. Honest and revealing, Lombardi warns of the financial warning signs you may be missing, what it takes to rebuild your life after bankruptcy and how to cope when trying to climb out of a financial abyss.
Jenny Hoff: Janet, thank you so much for joining me today.
Janet Lombardi: Thank you for having me.
Hoff: Your story is pretty compelling. I’ll say, when I opened the book, I wasn’t totally expecting what was inside but it does chronicle your inner life as you go through both what feels like a midlife crisis and a crumbling of your marriage, and also the shock that the money you thought you had was no longer there. So, I want to concentrate on the financial aspect of the book and what people can learn from your experience. Can you first briefly tell us what financial situation your family was in before and then how you guys ended up losing so much?
Lombardi: OK, sure. My husband was an attorney in private practice in New York, and I was a working mom, working at a nonprofit as an editor at the time, so we were living a nice middle-class life. We certainly weren’t extravagant. We had a lovely home on a tree-lined street in a New York suburb. We had two children, still have them, thank goodness. We had a mortgage, we had the natural expenses that come with children, and that kind of thing. Then things unraveled after that.
Hoff: Things unraveled, and so how quickly did they unravel?
Lombardi: OK, well, they became apparent to me that they were unraveling a long time after the debt had started to accumulate. What happened to our family was that my husband had, for one, been hiding a drug addiction, so sometimes, drug addictions or alcoholism, not all the time, but often can go hand in hand, and as progressive diseases, the finances can become worse. He was not, obviously, looking very closely at the bottom line, and he started to hide his debt as he became more unable to grow his business. He was also an eyewitness of the collapse of the World Trade Center which is in my book, and he suffered post-traumatic stress disorder, so it was kind of like a perfect storm, things coming together: his business after 9/11 started to fail, he started to become more and more desperate, he ratcheted up his drug use. All these things that were apparent to me on their face, correct? But what was actually going on behind the scenes was something that I was not exactly delving into, so the debt was growing, and the watershed moments in my situation was when I called my financial adviser to ask to see the statements and he had told me that I’d better ask my husband, and to get myself a good lawyer, a good accountant and a private eye. And that was the moment, yes, that was the moment where I started physically shaking and just really confused about what was happening, like I hadn’t realized the level of the desperation, that he started to empty his entire account, and his college account, and that was the moment where I started to really understand, but it takes some years for that to accumulate.
Hoff: So, I want to get into a couple of things here that I think that are very interesting. One, was he mainly the one in charge of the family finances? So, was he the one aware of whatever funds you had, he was making the contributions, paying the bills, and was that something that you basically stayed out of? Was this not a conversation you guys had on a regular basis?
Lombardi: Well, we did not have the conversation on a regular basis but no, I was involved with the finances. I was involved with the household finances which were paying the mortgage and paying our household expenses, and the expenses that have to do with the children, and I didn’t know about our investments, so I wasn’t someone, which is what makes it all the more interesting in some respects, that I wasn’t someone who had completely handed over, OK, I had handed over some of it but because he was an attorney, he has his attorney’s account. So, when it came time to pay our bills, like on a monthly basis, he basically would give me a check and I would deposit that in our joint account and I would pay bills out of that. There were some household expenses that he was paying that I had not realized until later that he actually wasn’t paying, and he was responsible for certain things. He was paying our insurances, our real estate taxes, things like that, so then when I took a good look after that moment, and I really had to excavate what the financial picture was which was going from files, and just trying to make [0:05:42] of things but a lot of that had been happening through his attorney’s account. Now, we did not have a weekly meeting or a monthly meeting, or a half yearly meeting about our finances because my husband would not have that conversation. Of course, later I realize why he did not want to have that conversation, because he had run out several hundreds of thousands of dollars of debt, so [0:06:05] for me, and in the book, of course, I don’t want to explain how he did eventually get prosecuted for all the crime because he was taking money out of the clients’ escrow. Of course, I knew nothing of that, but the moment that I talked with my financial adviser and he alerted me that something was amiss, then I went into action.
Hoff: What sparked the initial conversation with your financial adviser? Did you get something in the mail that seemed shocking to you? What was it?
Lombardi: No. What had happened was, this was at the end of 2006 and we were still getting paper statements for our annual, the end of the year statements, and they hadn’t come, and so I was kind of curious about why I hadn’t received them. And so, I called him to say, “Hey, how come I haven’t received the statements?” And so that really was me calling him which was sort of an interesting thing because he really wasn’t able to call me because my husband had been emptying his accounts, but he was glad I called him because he wanted to tell me.
Hoff: So, the accounts that your husband was emptying, was your name on those accounts as well? And is it allowable that one person can make the financial decisions if it’s a joint account?
Lombardi: Right. Well, that’s a very good question. He had been emptying his IRA account, so those were his accounts but we also had a college annuity that had been set up for our son, and that was another account that he had emptied. Now in terms of debt, that’s another situation.
Hoff: Yeah. Can you go into that a little bit more?
Lombardi: Sure. I did get a look at my husband’s credit report during the time when I was excavating and getting to the bottom of things. He gave me permission to see his credit report and I got my own credit report, and what I found on his credit report was totally shocking because that’s where I saw the sums and that the balances, that he had borrowed so much money, and as far as my own credit report, the thing that was important to me was anything that was joint, so there was one particular credit line that–it was actually a business line of his that had my name attached to it, and he had run that credit card up, that line up in a year, I think it was a $60,000 line, and so I became responsible for that even though I really didn’t know it existed or I’d never spent any of it.
Hoff: Wow. So, looking back, what signs were there that something was amiss that you either didn’t notice or you misinterpreted when it came to him hiding something from you like this?
Lombardi: Sure, well, first of all, he was very cagey about talking about money which sounds maybe innocuous but actually it’s not. Every time I would bring up the conversation, “Please can we sit down? Let’s sit down, let’s take a look at the finances,” like a normal conversation about money, he just wouldn’t have that conversation. He would say, “Oh, I can’t do it now, let’s do it tomorrow, why do we need to look at that?” All those kinds of questions that I was just asking a very normal question and not getting the responses. And also he was very vocal about what I had been spending which was nothing compared to what he had been spending. Yes, so he would say, “Well, you’re doing this here,” so it was very much: I’m not going to talk about myself but I’m going to talk about you and what you’re doing, and I bought it. I found that it was really very hard to pin him down. There were other signs as well. Somebody, again, who scrutinizes your spending but won’t discuss their own, right? Maybe it’s deflecting attention. Somebody who won’t share or show you the statement for the bills, that’s no hard evidence, right? Because when I was, what I just called, that I have referred to I think twice in this conversation as excavating. It was excavating because there were files and files and files but I didn’t even know that they were accessible. The other thing is that sometimes when people are really deeply in debt, they get afraid to open mail. So, I found unopened mail, statements, all that kind of thing, squirreled away in kind of a hiding spot, so that is a real telltale sign of somebody in financial trouble. And the last thing I would say about someone being unfaithful financially is that the problem generally won’t fix itself. I think it’s the real red flag, and if somebody can’t get full disclosure that that should really be something that one needs to be recognizing that, wow, things aren’t exactly as they seem.
Hoff: Yes. What did it feel like when you found out that the college funds for your kids was emptied? That you guys had hundreds of thousands of dollars in debt? That the secure future that you had been counting on, and a secure retirement one day was gone? What was it like for you when you found that out and it really hit you?
Lombardi: Well, it was devastating to say the least. I felt very betrayed. I was scared. I was really, I think mostly bewildered: why hadn’t he come to me? And why wasn’t he disclosing this? And my thinking was, that he must be in such desperate straits. That was also my fear, that he must be in such desperate straits that he feels like he needs to do this, and so what is really going on? Who is this person that I trusted? And there’s another piece of this stuff that I’d like to address, and that is that I had to separate myself emotionally from him in order to be financially separate. I needed to stop listening to him, if you will, but he would tell me things, and he was an attorney. So, he would say things like, at one point, and I described this in the book: that I went to a lawyer, I said to him, “I’m going to a lawyer,” and he kept dogging me around the house and asking me why I needed to do that. So, I had to turn off. I think that turning off emotionally was so painful to me because I loved him.
Hoff: Mm-hmm. But you had to just stop listening to the excuses and the manipulations that he was doing in order to get you not to pursue it further?
Lombardi: Exactly, and I did. And another thing on the road to financial recovery is I think that one, he really does need to take the emotion out of it because it is such an emotional issue, obviously, even if you’re not in a situation like that with him. Money is such a trigger emotionally, it’s such a signifier, it means so many different things to people, but really, you need to take the emotion out of it and then make decisions. Once I was in my financial recovery, I had to do it very logically and very much like goals.
Hoff: Yes, you have to just get out of your head, almost like you’re doing it for somebody else and not for yourself.
Hoff: So, it’s interesting because we hear about bankruptcy and a lot of debt, and generally, you think it’s people that are not making a lot of money, that they’re living on the edge anyway, they’re overspending what they make and that kind of stuff, and when you have a successful career, your husband was an attorney, you were working for nonprofit, you guys had a house in the New York area. Was bankruptcy and debt just something that was completely not on your radar, not even considered a possibility for you guys?
Lombardi: Of course not. I did not consider it a possibility. The word scared me. I didn’t think that I would ever be faced with a situation like that, but the more I educated myself and I’ve also talked to a lot of people and have been in groups, and I’ve been into money coaching, the amount of money that you make doesn’t really matter because you can overspend at any level, and it’s not being aware, like taking out the financial awareness, I think that really gets people in trouble, so to me, to know your bottom line monthly. You need to know your inflow and your outflow but you can be making $250,000 but you’re spending $350,000, you’ll easily go into some very serious debt because it’s just numbers on a higher level, but if you’re not paying attention to what’s coming in and what’s going out, you’ll very easily get into debt.
Hoff: Did you ever feel hopeless in the situation, like you were not going to get out of that situation and you cannot see a light at the end of the tunnel?
Lombardi: Absolutely. There were many dark nights of the soul. Yes, I felt really desperate and frustrated with what I saw was the lack of my husband’s “fixing it.” I was making suggestions, “You need to get another job, you need to do this, you need to do that,” and he was not doing any of it, so that was pretty frustrating, and I did feel very hopeless, and especially around 2010. That was the year that we had to sell our house. That was very, very sad for me because I loved my house, but I made that decision to sell the house and I did that all on my own because I wanted my finances be manageable and we had a very big mortgage, a ridiculous subprime mortgage that I knew I was never going to be able to pay off that mortgage. I was never even going to make a dent in that mortgage, and really, I was never going to own my home, so I made that bold move but during those decisions, there were some pretty dark nights. I remember one night, sitting up in bed and saying to myself, “We need to sell the house,” and so like the next day going into action [0:15:06].
Hoff: So what helped you then get to that other side where you could see the ability to recover financially, where you could take charge of your life and say, “OK, we’ve got crazy months of debt, we’re on the hook for a lot right now but I’m going to be able to get through this.” What was the process like?
Lombardi: Probably one of the most helpful things was that I joined a DA group, Debtors Anonymous group. It’s a 12-sect group for compulsive debtors, and even though I would not consider myself a compulsive debtor, I certainly did not have healthy financial. I did not have a healthy relationship with money, and there was one point where I said to my husband, “Let’s go to this meeting. Somebody had told me about it some years ago,” and he said, “Sure.” We went and he stayed for a couple of months and I’ve been in that group for 10 years.
Hoff: Oh, wow.
Lombardi: Yes, and I learned so much about debt, about behavior, starting a spending plan. One of the two programs is writing down everything that you spend. I had never done that and just that alone is incredibly enlightening. So really understanding. They have the phrase where they say, “Going from vagueness to clarity,” and you can’t become healthy until you’re in clarity which is financial awareness, again, getting the numbers down on the page, putting them into an Excel sheet, however you want to do it, with an app. And another thing that the program offered me were people’s help, amazing, wonderful friends, just lovely, who helped me get out of my situation, and that gave me great help, so I knew that if I just went to those meeting and followed that plan and set myself some goals, and had meetings with my partners, and stayed on track, that I felt that I could get out of it, and I did.
Hoff: What happened to your husband?
Lombardi: Well, he did serve time in prison for a year for his white collar crime about the time that we separated, we sold our home, and I went to live with my sister for two years after that. That’s a whole other story. Pretty wonderful in many ways but that was my way of getting back on my feet financially. And he served a year in prison and he’s certainly out now, and we did get divorced, eventually, and we are loving friends.
Hoff: Wow. Wow, you can even have a friendship after all that.
Lombardi: Yes, we do. We have a very good friendship.
Hoff: What about your children? How did you help them cope through this financial and family crisis?
Lombardi: That’s a great question. I have two sons that I love dearly, and at the time, when the bottom fell out, I had one son in college, he was at private university, and the other son who was in high school, so luckily and thank goodness, we all were very close as a family. There was a lot of love and there was a lot of support. There was certainly dysfunction and because of what I’ve described, but with the children, we were very loving parents, so we had a good relationship with our children. So I, as I said before, I went to live with my sister after the sale of my home and I stayed for two years. I expected to go for a couple of months, and one of the reasons that I stayed for two years was because I wanted to pay my son’s college tuition out of pocket, so I tried to keep their lives as normal as possible. One that was in the private college at the time, he was finishing up his program, he wanted to do an internship in California. He was a musician, and I remember at one point, he was saying, “I’m not going to go, mom. I’m going to stay here with you,” and I said, “No, no, you absolutely go.” That was important to me.
Hoff: So it was the making the sacrifice on your end so they wouldn’t be punished for decisions you guys had made?
Hoff: That’s interesting. And so how long did it take you to start feeling like you could take a deep breath again and feel secure, and feel confident in finances? How did you get to the point where now you feel confident about money and like you know? How long did it take you?
Lombardi: Well, it took me about three years to get out of debt, and after that, I lived with my family for a couple of years. I was able to save money, as well as pay my own tuition so I wouldn’t have to get out a parent well or we wouldn’t have to take out a loan. My children actually did take out some student loans but they are relatively small compared to the cost of education. So it took me about three years after that, and then I was able to buy an apartment and eventually, buy a car, and I never paid a bill late. That was one thing. I never borrowed money from anyone, and I’ve never touched my retirement savings, my goodness, that was a very, very smart choice to move on my part, even though there was a point when my husband was asking me to do that, to dip into my funds, and I did not. So I feel like ever since then, I have been building wells because I have no debt. I haven’t had any for the last seven years. I don’t use a credit card myself. Plenty of people do, and I completely encourage it. There’s many reasons to do that. I just don’t trust to do that. I check my finances constantly, so I reconcile accounts. In fact, I am actually engaged to be married.
Hoff: Oh, congratulations.
Lombardi: Thank you. So I have a new partner in my life who’s very wonderful, and we talk about money all the time, for a better future, about how we want to spend our money. We do what my fiance calls the “Monthly Business Review,” so every end of the month, we sit down and we look at what we have together, and that’s a whole other experience for me, of course, getting to that point where I can do that with someone, and trust. But I do. He’s very, very solid, and I love that we talk about money all the time.
Hoff: So what advice would you give to a newly married couple and they both maybe have secure jobs, and they’re living a pretty abundant lifestyle? What advice would you give them regarding finances, if you could, at the beginning of their relationship?
Lombardi: That’s a great question. I would advise any couple to think about money and how they want to manage money, what their attitudes are about money, how their family approach money. There’s such a relationship between how your mom and dad dealt with money and how you met with good money. Think about what money means to you, what money is, a signifier. It might mean, for some people, freedom. It might mean, for some people, or there’s so many different things, and sometimes, even when people have money they’re afraid to spend it, so third, it’s good to have a spender and a budgeter but that can kind of be worked out. But the point is that that’s a conversation that you need to be having and have it without judgment, OK? It’s not about somebody wanting something. It’s about understanding why someone might want something or why somebody doesn’t want to do something, and then coming to a compromise about how to manage it. I think it can actually be fun, if you think about it in terms of goal setting. You have a student debt that you want to pay off, if you want to buy a home, so how do you both get there? And it’s not rocket science; it’s addition and subtraction. You can see what’s coming in, you can see what’s going out, and certainly, live within your means. If you have credit cards, certainly manage them well, and pay off your balances, and know what your interest is. Just have very good financial awareness, and both people need to be involved. I think that one person can be the money wrangler, so to speak, but that each person needs to have full understanding of what’s happening with money and to be able to say, just know in your head, this is what it costs me monthly to live, this is what comes in monthly.
Hoff: Yeah, absolutely, and maybe do what you and your husband finally did, and look at each other’s credit reports, and just make sure that everything’s on the up and up, and there aren’t any loans or debt out there that one person isn’t aware of.
Lombardi: Absolutely. That’s a really good suggestion. There shouldn’t be any shame. There shouldn’t be anything hiding. If somebody is hiding something, then that’s a red flag, but you should definitely be able to handle each other’s credit report.
Hoff: What about to a family or a couple that is in a situation that, similar to what you were in, maybe they’re in financial distress, maybe they’re facing a lot of debt together and they need to tackle it. What would be your advice to them how to get started on this so they can get out on the other side and maybe even keep their family intact?
Lombardi: That’s a great question. On my website, I have what I call “The Seven Steps to Financial Recovery,” so I think the first thing is, really to be willing to take responsibility. If you’re in a mess, you can get out of it. It doesn’t mean that it’s hopeless. You can absolutely get out of it. I think people get out in situations that are even worse than mine, and I’m proof that it can be done. So first is just to be willing to take responsibility. Sometimes, I think that’s a big issue. You’re kind of blaming the other person. Everyone needs to look with their own role in creating the mess, if you will, that it’s not about the other person. It’s really about one taking responsibility for himself and being committed to the idea that fixing the situation is going to take time. It’s going to take hard work, and it’s going to take some change, so being willing and embrace. You can be dealing with paperwork, you might create what I call “punch list,” items that need to be tackled. If you can break them down, if you can get clarity about, what really is happening here, is again, going from vagueness to clarity is really important so that you see your situation. You have numbers on the page or in an Excel sheet, or however you want to do with that. You’re actually looking at the numbers because the numbers don’t lie. So it can take a lot of courage to do that, and one of the things about the DA program that I was in is that you can have a partner so you can actually sit down with someone else and look at it with someone else, and that makes a big difference. So it’s changing your attitude and recognizing that behavior has to change. OK, you did not get in there from nothing. You got in there from a certain kind of behavior, and that it’s also going to take time to get out. If it took you five years to get into that situation, it’s not going to take you six months to get out, so you really need to be patient with that.
Hoff: Great advice. And your website is janetlombardi.com, and so I’ll definitely, I will put that in as well when we put the transcript up on creditcards.com, and we’ll link to that so people can get to there. And also, finally, I want to ask you: our podcast is called “Charged Up.” You put your life story out there, your secrets, your fears, your vulnerabilities, everything out there in your book which really reads like a novel but you have a lot of really important experiences that you went through that I think so many people could relate to. What charges you up about putting your story out there for the world to see?
Lombardi: Oh, I want to share my story because I want to inspire people to handle their own adversity and to know that when a crisis hits, they can get through it, OK? I sometimes say getting out of a mess can be a beautiful thing. I also want to help people who are struggling with the day-to-day finance, and there’s really a role that compassion played for me in my book. Compassion, forgiveness, recognition when a family member screws up. So I really wanted to talk about that. I wanted to express that. I wanted the world to see my story as a complex story, not one that just if I’m going to see the headlines about people who get themselves into trouble and you think, “Ugh. How could somebody do that?” So my story was kind of like, I’m willing to tell you how that happened. I wanted people to see the face behind the situation and express how much my family, my extended family, and what my personal role was like, and again, just to bring awareness to the topic of money which is one that is still kind of a taboo subject that people don’t want to talk about it. And I think it’s a very important conversation, one that’s worth having, one that I find fascinating, and very important to having a beautiful life.
Hoff: Great advice. Janet, thank you so much for joining us today, and thank you for sharing your story with everybody.
Lombardi: Thank you.
See related: Charged Up! podcast: Becoming financially literate