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Commercial Law Bulletin

Bankruptcy-Related Depression:  Dealing with the Mental Health of your Clients

A very critical part of the bankruptcy process doesn't have anything to do with legal issues, reorganization plans, or creditors' claims - it's the mental health of the debtor.

Most debtors will experience some degree of depression during bankruptcy.  Generally, this depression can be managed with readily available treatments.  Some debtors will also suffer from what Karin Huffer calls Legal Abuse Syndrome.  Huffer is a marriage and family therapist in Las Vegas and the author of Legal Abuse Syndrome.  Huffer is a marriage and family therapist in Las Vegas and the Author of Overcoming the Devastation of Legal Abuse Syndrome (Fulkort Press, $19.95).  She defines Legal Abuse Syndrome as "a type of post-traumatic stress disorder that people develop after a cumulative crisis".

Chapter 11 cases in particular can be lengthy, complicated, and very emotional, points out Milton P. Goldfarb of Newman, Goldfarb, Freyman & Klein, .C., in St. Louis.  "in the vast majority of cases it will boil down to the principle of the company being the one responsible for bringing the company into line, helping do everything that needs to be done in the bankruptcy court to keep the case going, and then still negotiating the plan, dealing with the plan, and working with the company to bring it out of Chapter 11 and make it healthy," Goldfarb says.  "If the attorney is going to be able to help his client have a successful Chapter 11, it's very important to keep the client as focused and mentally well as possible."

Attorneys don't need to understand or be able to distinguish true clinical depression from the casual bad day, but they should be alert to potential problems, says Patricia Weik, a consultant, clinical psychologist, and lawyer with RHR International Company in Wood Dale, Illinois.  "If the question [in depression] even comes to their mind, it's going to be because they're seeing someone who is in obvious distress", says Weik.

It's a good idea to bring up the issue of depression at the beginning of the bankruptcy process.  Goldfarb says, "One of the things I do at the first meeting with a prospective Chapter 11 client is to explain that depression is natural, they should expect it, and we all have to look for it.  I try to get a commitment that if either of us sees it coming on, the person will get professional help."  Later on, if the symptoms appear, Goldfarb will remind the client of that initial conversation and suggest some form of action.

Occasionally, depression becomes an issue with creditors.  Sometimes it's the owner of a smaller company reeling from a major customer's bankruptcy; more often, says Goldfarb, depression manifests itself in the credit manager who granted the extension of credit and is now dealing with the consequences.  The basic techniques for dealing with the problem are the same:  recognize and address the issue, and refer to a competent professional.

Depression may also become an issue with employees of companies that are in bankruptcy, and attorneys may want to remind owners to watch for symptoms in their staffers.  Nancy Garbett, President of Transition Management, Inc., in Salt Lake City, Utah, says that open and honest communication with employees about the status of the company and the reorganization efforts is essential.  "Employees need to understand what changes are occurring and what it means for them," Garbett says.  "If they are feeling insecure and stressed, they won't perform at their maximum level and could hinder the company's financial recovery."

Though attorneys must be willing to address the issue of depression and anxiety in the clients, they must clearly do so from the perspective of a non-mental health professional and protect their own well-being in the process.  "Bankruptcy attorneys can end up with compassion fatigue from watching what their clients are going through," Huffer says.  She points out that many clients will attempt to use their attorneys as therapists, and that attorneys must take control of their situation and make appropriate referrals.

What to watch for; what to do:

Weik says symptoms of depression include feelings of sadness and blueness; a loss of concentration; excessive crying; changes in sleep pastern; changing in eating habits; loss of energy or listlessness; guilty thoughts; a sense of worthlessness or hopelessness; thoughts of suicide or even, in some cases, homicide.  When one or more of these symptoms are present, Weik advises addressing the situation in a matter-of-fact but direct manner.

If the client does appear to be experiencing some serious depression, avoid minimizing heir feelings.  "A lot of people - particularly attorneys, because attorneys are trained to solve problems - will want to back away from this uncomfortable situation and say something like, 'it's not that bad, things are okay.'  What that does for a depressed person is essentially tell them that they are being ridiculous, that things are not as bad as they think, and that gets them into another negative spiral," says Weik.  "You need to normalize the process for them.  Say, 'Yes, this is really a tough situation, and most people would feel bad in  your shoes.'"

Encourage the client to seek help for the depression.  This is especially important if the client is making statements that are either suicidal or homicidal.  "If you hear those kinds of statements, you need to take them seriously," says Weik.  "The idea of people who talk about suicide never do it is wrong:  it's a myth.  If you get somebody in your office making statements to the effect that they want to die or that their family would be better off without them (or if they are expressing a desire for retribution against someone who has wronged them), stay calm and ask the person if he or she has been having those thoughts for a while."  After drawing the person out and getting a sense of how serious the problem really is, make a suggestion of seeking help - or, if it appears that a crisis is imminent, make a call for help from y our office while the client is there.  Weik suggests exploring referral options ahead of time so you know who to call when the need arises.  If you're unsure about your local resources the psychiatry department of a reputable hospital is a good place to start.

Huffer's book includes a list of what not to say to a depressed client, including:

• "It's only money."  Money reflects the person's status, feelings of worth, security, earned lifestyle, and taste.
• "I know just how you feel."  You probably don't; saying "I care how you feel" is better.
• "You still have your health/kids/family."  Kids, family, and health opposed to material goods are apples and oranges.  One does not solve the other.
• "Crying isn't going to help anything."  Probably not, but we don't cry to help things, we cry cause nothing helps.  It's a natural part of grieving.
• "You should have..." and "Why didn't you...?"  Don't criticize or promote further guilt by focusing on what the debtor might have done to avoid the current situation.

Eight Steps for the Depressed Debtor:

"When a lawyer takes on a case, he or she is taking on a person who feels like a hostage," Huffer says.  "The person feels dependent, angry and trapped."  In her book, she suggests the following eight steps for a debtor for dealing with depression and Legal Abuse Syndrome:

1. DEBRIEFING.  This is the process of going through everything that has happened, and requires an objective, patient, non-judgmental listener.  Debriefing typically occurs when the debtor arrives in the attorney's office with boxes of files and lengthy, complicated explanations of what has occurred to bring him or her to this point.
2. GRIEVING.  The debtor must take the time to grieve over what's been lost, no matter how trivial or significant each element is.
3. OBSESSION.  Huffer says this is a natural attempt to regain control, and it's important to acknowledge these feelings so that they can be managed.  Left unchecked, they can be distracting and damaging. 
4. BLAMING.  It's common for debtors to look for a scapegoat or to severely castigate themselves for what's happened.   Learning to deal with blame is part of healing.
5. DESHAMING.  Huffer says this has to do with "putting your shame in the right place."  Debtors often feel that they lack control, and find that more embarrassing than if they had deliberately done something wrong.  "You have business people who have wielded clout in their community for years who are in bankruptcy and suddenly they control nothing," Huffer says.  "They feel shame."  Debtors need to work through their feelings of inappropriate shame.
6. REFRAMING.  The first five steps lead to this,t he beginning of recovery, where negative emotions are turned around.  For example, an initial perception of "I should have seen it coming.  How could I have been so stupid," can be reframed to "I am not responsible for knowing everything.  I am an intelligent person who cannot control other people or situations."
7. EMPOWERMENT.  Once empowered, the debtor can focus his or her energy on surviving the bankruptcy, working through the reorganization and rebuilding his or her personal or professional lives.
8. RECOVERY.  In recovery, the debtor can be reaffirmed and re-enter the game of life.

If it appears the client is resisting your efforts to assist with depression, Weik advises remembering and using the natural balance of power that occurs in most attorney/client relationships.  "Attorneys who have a relationship with someone, also have a certain degree of authority with the person, and they may be able to use that in the sense of stating assertively, 'I really think you need to see someone and talk about this," she says.