As I mentioned last week, Storm Preparation is covering the five stages of grief as it applies to bankruptcy. Denial is the first of the five and is the first stage we’ll cover in this series.
Denial has been interpreted as “a conscious or unconscious refusal to accept facts, information, reality, etc., relating to the situation concerned. It’s a [defense] mechanism and perfectly natural.” How can this manifest in the context of a bankruptcy debtor – or a future bankruptcy debtor? Here is what came to my mind:
In this real estate market where values continue to deflate, denial can manifest in a homeowner that believes that property will sell for a profit. They believe this even though there is no equity, even though it is increasingly difficult for people to obtaining financing, and even though the property has been on the market for months and shown only a few times.
It can manifest when month after month, and year after year, income has decreased and credit is used for basic personal items: food, gas, utilities. I can also manifest when month after month, and year after year, payments on debt are barely enough to cover interest.
It can manifest after two parents who worked very hard to get their family into their own home, suddenly experiences a job loss with one parent, and then a health crisis with another. Even though these two events would trigger a shift in personal expenditures, including the monthly housing payment, denial (and repeated refinancings) can help the family coast along.
Of course, it doesn’t help when voices from Washington announce that the economy is just swell, and that things are getting better (even though oil is $130 a barrel). It does not help when there are commercials where real estate pros are announcing that “it’s a great time to buy.” It does not help when local leaders claim they are working towards a solution to the foreclosure crisis, when in reality nothing is really changing out there. All of this stuff just feeds into the denial. But, loan modifications are not occurring at any exponential rate, and the price of basic goods is going up. Forget what the talking heads in Washington say, head down to the supermarket and see if I am wrong. Be sure to stop for gas along the way.
Getting Locked In
It has also been written that “people can become locked in this stage when dealing with a traumatic change that can be ignored.” Thus, notices from creditors remain unopened, telephone messages get quickly erased, and in many cases, the telephone is not picked up at all. Yet bankruptcy – or financial collapse – “is not particularly easy to avoid or evade indefinitely.” Either the money is there, or it isn’t, either it will be or it won’t.
In researching this issue, the one constant I found was that denial is a completely natural defense mechanism. Yet while it’s natural, there is no litmus test to determine the natural length of the denial stage. This depends on the person.
For some, the denial stage will be quick. Think of financial difficulty as a wound on your arm that is covered by an adhesive bandage. Some might have the wherewithal to rip that bandage off, grimace a bit, and then move on. Others, might try and wash it off, or pull it off slowly, or may wait for the wound to heal itself where then the bandage will just fall off. We all face traumatic events in our own way, and in our own time. But for those that wait to pull off the bandage, it can only end up hurting them in the long run.
One of the hardest things in my job is having to show people that they are in denial. I often speak with folks who are hoping for a buyer or who are hoping for a refinancing or a loan modification. I speak with folks who have been out of work for years, but are sure they can go to work when the doctor eventually clears them, and then they will be able to pay their mortgage…if only the lender would be patient. I speak with folks who are telling me that the mortgage company is working with them even though an auction is scheduled for later in the week.
Another difficult aspect of my job is meeting with someone who has been in denial so long that they may have missed opportunities. If an auction is scheduled within days, or even hours, the only thing I can do to stop the process is file a bankruptcy petition. That leaves me little time to review, research, advise and plan, and chances are, the client does not readily have much of the documents I need to fully prepare all of the necessary schedules and statements.
My point is this: the longer the time is spent in denial, the harder it is for me (or any good bankruptcy lawyer) to find useful options for my clients. I know that ripping the bandage off is going to be painful, and the wound underneath is probably going to look just plain nasty, but until the courage is mustered to take it off, that wound – and the financial difficulty people find themselves in – is only going to fester.
Storm Preparation is a weekly series appearing on Wednesdays and offers tips and information to people who think they may need bankruptcy protection in the future. Questions, comments or suggestions can be addressed to firstname.lastname@example.org.
- Storm Preparation: Stage Two, Anger
- Storm Preparation: Bargaining
- Storm Preparation: Do Not Transfer Property
- Storm Preparation: The Stages
- Storm Preparation: Letting Go and Moving On
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