Bankruptcy

Storm Preparation: Stage One, Denial

By Bill McLeod, Esq.

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.

Full post as published by McLeod Law Offices on May 21, 2008 (boomark / email).