Of the five stages of the Kubler-Ross Model that people facing bankruptcy go through, the most potentially problematic is the third stage: bargaining. I suggest that this stage might invite the most problems because it is here that debtors do anything and everything to avoid bankruptcy. In doing so, they sometimes end up in an even worse position.
One way of bargaining might include balance transfers: paying high interest debt with a low interest line of credit. On its face, this is not a bad idea. However, it can be a problem if the high interest credit lines remain active. The only way I have ever seen this actually work is where the household cuts spending, and stops using credit all together (while paying off the debt).
Another way might include negotiating with creditors. How many folks are hoping that their mortgage company will work with them and modify their loan? How many folks are not going to do anything about the debt because they believe that lenders will eventually come around and work with them? Unfortunately, lenders are slow – if not completely unresponsive – in working with distressed homeowners. Waiting for them to budge, or for the government to do anything, is not a sound course of action.
And yet another way of bargaining might include simply waiting. How many are wondering if (or hoping that) the economy is going to get better once someone else is sitting (and presumably working hard for the American People) in the Oval Office next January? I prefer to stay out of the political fray of election politics, but if I were betting dollars to donuts (and really, who doesn’t love donuts!), I’d bet that there is little that the new president will be able to do about the economy in the short term.
There are also more problematic ways of bargaining. For example, how many are considering transferring property to buy more time? How many are considering taking a cash advance or getting a personal loan to get by, even though chances are, things are only going to get worse. All of these could invite big and expensive problems in a future bankruptcy filing.
If you find yourself saying: “If I only had more time…” examine how much time you already have had. Ask yourself if you really have a game plan, or if you only holding onto hope.
If you find yourself saying “If I take this loan now, I can see where things stand in a few weeks – or a few months…” Same question: do you really have a game plan? Are you inviting claims of fraud into a future bankruptcy filing?
Bargaining can take many forms, and is a normal part of this five stage process that we’ve been discussing here. But ultimately, this stage comes to an end. For some, it might send them back to the first stage of denial (“things really are not as bad as they first seemed”). For others, it may send them back to the second stage: anger. And for others, it may lead to the fourth stage. And that, we’ll cover that next Wednesday.
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 info@mcleodlawoffices.com.
Related posts:
- Storm Preparation: The Stages
- Storm Preparation: Stage One, Denial
- Storm Preparation: Acceptance
- Storm Preparation: Stop Using Credit
- Storm Preparation: Over Withholding
Tags: Storm Preparation