CFP Mary Katherine "Kit" Mac Nee, of Morgan Stanley, wasn't worried when news of her bankruptcy went public on a prominent website – because her clients already knew all about it.

"Especially as I was going through the process, it was something I always shared with my clients," says Mac Nee, "mostly as a learning experience and because life doesn’t always go the way we planned it."

When the CFP Board started publicizing the names of planners who have had bankruptcies in 2012, the intent was to warn the public about potentially problematic planners who can't manage their own financial lives. And there is indeed evidence that many planners don't take financial advice as well as they give it.

Not surprisingly, the board's move was met with dismay by some planners who didn't want their struggles and missteps to become public knowledge.

But Mac Nee, whose office is in Pasadena, Calif., is one CFP who says she has found a way to use the experience of her bankruptcy to filter out clients she doesn't want to work with and to build bridges with the clients she does. She filed for bankruptcy in 2010 and the board posted her name on its April list.

"If a client is uncomfortable with the fact that I had a bankruptcy and I made a mistake, I would rather have them not work with me," Mac Nee says. "I would rather have them work with somebody who they are really confident in."


Mac Nee says her trouble started with a common experience: at 40 she went through a divorce that sent her back to work for the first time in 13 years.

The market and real estate crash of 2008 and 2009 hit just as her first child was about to enter college and as she was counting on an increasing income stream to pay off $50,000 she had racked up covering the cost of a four-bedroom home, continuing to build her business and raising her children.

"What really drove [the bankruptcy] was getting three kids through college and raising three teenagers. I had two of the three kids in college in the fall of 2010," she says.

That same year, her son turned 18 and she lost $3,000 a month in child support and could not refinance her home. 

"So it was kind of like the perfect storm," she says, using a phrase that many CFPs with bankruptcies employ to describe the experience.

She decided she had two choices: either pay off her credit card balances or put her three kids through college. Although she and her ex-husband jointly footed the bill for their children's' college costs, her share came to about $100,000, she says.

All three went to the University of Redlands in Redlands, Calif.

After the last of her children graduated earlier this year, Mac Nee was exultant.

"It’s been an exciting spring, having all three kids graduate," she said at the time. "I think the greatest blessing I have is that all three have found a passion in their lives and they are committed to working for that passion.

"And all three of them are currently employed, thank the Lord," she added, with a giant laugh.


As for herself, Mac Nee says that since the bankruptcy she now watches her spending closely. Although she didn’t put her house through the bankruptcy, she ended up selling it at a loss through a short sale with her bank, and downsizing to a smaller rental.

"It became a burden and it wasn’t fun anymore," she says. "It was me in a four bedroom house. I don’t think home ownership is necessarily cut out for everybody. I have since learned the difference between looking at a home as an asset, versus as an expense. There is not a right or wrong answer in this. For me, renting is right."

Now that she can begin focusing on her own retirement again, Mac Nee says she expects to work until she turns 70 or, even 80, especially given that longevity runs in her family.

"I don’t think my financial preparedness for retirement is any less than what we are seeing for a lot of 50-somethings out in the general population," she says.

"The reality is if you look at a lot of successful business owners," she says, "many of them have gone through bankruptcy, too. It’s definitely not because you’ve done anything criminal or because you have been a bad person. It’s because life circumstances happen. It’s a legal tool that we can make use of when appropriate.

"Do I ever want to do it again?" she asks. "No thank you. We all make mistakes in life. We all wish we could have done things differently. But we have to live with the consequences."

Now that the CFP Board has started routinely publishing the names of planners with bankruptcies, Mac Nee says she'd like to talk to others who've gone through the experience.

"We can start a support group," she says, sounding as though she is only half-joking.

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