Over the last ten years, consumer debt has doubled in the United States prompting 1.6 million Americans to file for bankruptcy in 2004 (USA Today). President George W. Bush has signed the biggest rewrite of US bankruptcy law in a quarter of a century, making it harder for debt-ridden Americans to wipe out their obligations. Bankruptcy is at an all-time high right now because people see it as an easy way out. I know first-hand the appeal of this "easy way out." In Rich Dad’s Prophecy, I explain how in 1979, I was thirty-two years old and struggling to keep my business above water. My rich dad taught me a valuable lesson about taking responsibility for my actions and fulfilling my obligations.

My rich dad said, "Take responsibility for your actions. Avoid bankruptcy at all costs." My nylon and Velcro surfer wallet business had taken off faster than expected. In only a few years, we were a big company with a sales force of over 380 independent sales reps in the United States alone. The problem was that we had a world-wide product, but we were a small-time company with a young, incompetent management team. When success and incompetence meet, disaster is not far away. I was up to my ears in mistakes, buried by my own personal incompetence.

I had always thought of myself as a good, honest person... yet under pressure, the character that emerged was the person who betrayed those that trusted me. I was about to default on paying my employees and their payroll taxes. I was using my employees’ money to keep the company afloat. My rich dad had been my teacher since I was nine years old. He was a very loving and caring man, but when he was angry... he was not a polite man...

"Why don’t you face the truth? You and the three clowns you call partners have mismanaged your business... you don’t know what you’re doing... you’re incompetent... and worst of all, you don’t have the guts to admit any of this. You guys are pretending to look like businesspeople... but when I look at your financials, you boys are either crooks or clowns. I hope you’re clowns... but if you don’t make some changes, you clowns will become crooks."

"There is nothing wrong with admitting you’re incompetent. But there is plenty wrong with lying and pretending you know what you’re doing. Lying and pretending you know what you are doing is a bad habit. If you want to be rich and successful, you need to learn to tell the truth quicker, ask for help quicker, and be more humble. The world is filled with arrogant poor people, educated and uneducated… people who cannot admit they do not know something. The world is filled with people who go through life pretending they are smart… and that makes them stupid. If you want to learn quickly, the first step is to admit quickly you do not know something."

I was over a million dollars in debt. I had two choices. My rich dad often said to me that inside each of us is a cast of characters. Inside each of us is a kind person, a mean person, a greedy person, a rich person, a poor person, a coward, a crook, a hero, a liar, a cheapskate, a loser, and more. He constantly reminded me that growing up was a process of choosing which person we wanted to become... which person we wanted to draw out of all the cast of characters available. To Rich Dad, a person’s choice of character was far more important than a person’s choice of profession.

"When it comes to money, the world is filled with cowards. Money has a way of bringing out the coward... more than the hero... and that may be why there are so few truly rich people. Money also has a way of bringing out the cheat and the crook in some people... and that is why our jails keep filling up. Money also has a way of bringing out the betrayer... the person who will steal from those that love and thrust them... and when you 'borrowed' from your employees, that is the character you were choosing to become. Crooks and cowards are one thing... but becoming a person who betrays those that trust you is one of the most despicable of all characters available to all of us."

Truth and honesty are not always pleasant and this dose of truth and honesty was very unpleasant... yet necessary. I realized that in my desperation to save my company, I had chosen to betray those that trusted me. This was a deeply painful lesson, a lesson I would always remember. I had two choices. I could continue to be a coward, crook, and betrayer and eventually file bankruptcy, or I could step up to my responsibilities and obligations. I shut the business down and liquidated the remaining assets. I paid all the money I owed to our suppliers, our investors, the government and our employees. It wasn’t easy.

My rich dad later told me, "Although painful, because of the way you chose to handle this business failure, this painful short period of time will someday become the basis of your long-term financial wealth. If you had run and lied, your financial future would probably be a coward’s future... because if you had run, you would have been letting the coward in you determine your future."

My rich dad was right.

If you have gotten yourself into debt...

Take Responsibility

If you have gotten yourself into debt, you need to take responsibility to get yourself out of debt. Get the counseling you need, look at ways to reduce your debt and increase your revenue to be able to pay off the debt that you incurred. Simply put, it’s an act of responsibility.

Determine How You Got There

Take a long look at where you are and how you got there. Be willing and humble enough to learn from your mistakes. Each failure will show you what you don’t know and what you need to learn... and that learning experience will lead to your next success.

Bounce Back

It took you a while to get where you are (in debt/ in deep debt), and it will take you a while to bounce back. Remember that the painful short-term will someday become the basis of your long-term financial wealth.