Published by Mark

Untying The “Nots” Of Bankruptcy

November 4, 2008 at 4:47 am

Browsing in a bookstore the other day, I came across an unusual book title. The book was written by a professional speaker named Patti Hathaway who teaches companies how to prepare for and how to handle change. It’s called, “Untying the ‘Nots’ of Change Before You’re Fit To Be Tied”. Hathaway talks to company leaders about the fact that employees who experience constant change on the job tend to get sick and miss work. Some larger companies lose millions of dollars each year due to employee absenteeism, all because of their resistance to change. Hathaway calls herself The Change Agent, because she teaches people how to overcome resistance to change and even to embrace change.

As an Indiana bankruptcy attorney who’s counseled with tens of thousands of people over the years, I see resistance to change in many, many of the situations I deal with in handling bankruptcy cases. Basically the resistance I see takes the form of what psychologists call denial, which means pretending a negative thing isn’t happening when it actually is. I see people doing this all the time with credit card bills. Money is tight, and there really isn’t enough to keep up payments. To avoid dealing with the situation, the consumer lets the bill sit on the pile or even skips that payment entirely. It would have been much more productive to call up the credit card company and to at least attempt negotiating a lower rate of interest or some form of extended payment plan. Needless to say, the creditor might not agree to any concessions. But skipping a payment just means late fees and penalties, probably an even higher interest rate, plus “black marks” on the consumer’s credit report. This is a prime example of how refusing to deal with a bad situation can make it worse.

Even before the “housing crunch” made it quite a challenge to sell a home, I would see many, many people not facing up to the reality that they’d bought too much house and that they should downsize. Often, after a breadwinner was laid off from a job, it would be very difficult for the couple to keep up with the maintenance and the mortgage on a big house. Again, denial would often kick in. Rather than deciding to sell and to move to a more affordable home or even rent a place or calling the mortgage company and negotiating a more affordable or extended mortgage plan before things reached the point of a foreclosure notice, many kept putting off making such difficult decisions. The fact that they denied their lives had changed didn’t stop those changes from happening.

In an earlier blog about bankruptcy for businesses (see Business Bankruptcy – It Is What It Is), I noted the same denial on the part of small business owners. The book Hermanisms advises businessowners to save themselves in time, rather than “going down with the plane”.

Often, as I’m working on budget plans and lists of income and assets in the process of preparing clients to file bankruptcy, I can see that for the months and even the years leading up to this time, clients neglected matter because they didn’t know how to deal with change. Some people neglected their own health, putting off visits to the doctor in order to save on medical costs. Medical conditions sometimes developed (some that might have been prevented) that were so costly they helped drive the clients to the point of bankruptcy. In other cases it was simply the old story of trying to “keep up with the Joneses”, an effort to maintain a lifestyle that had become totally unrealistic and impractical after a big cut in income or a series of unexpected medical costs. I see people truly struggling to keep up with charitable pledges they had made during better times. Even though they need the money to pay bills, they’re embarrassed to admit they can’t fulfill their pledge. Again, denial of reality can make reality worse.

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