The Emotional State of Business Bankruptcy

The Emotional State of Business Bankruptcy
  • Opening Intro -

    Bankruptcy is defined in as a state in which a person, company, or other body is incapable of paying debts.

    It is arguably the worst-case scenario for employees and business owners involved in the company.

    Once bankruptcy has been declared, the property listed under the name involved is accounted for and divided among the creditors as dictated by the law.


Filing for bankruptcy can be an emotionally turbulent time in a business owner’s life. Long-standing businesses in particular tend to be of high emotional value to their founders in addition to being major sources of wealth and income. As a result, entrepreneurs filing for bankruptcy often experience a process of grief similar in many ways to that experienced when losing a family member or other loved one.

An explanation for this phenomenon is that people tend to place greater emotional value on things on which they have placed some form of investment. This is important to realize, as grief left unchecked can have adverse effects on the individual’s life, further sending those involved into a continually worsening mental and emotional state. At worst, this can lead to chronic depression and maladaptive behavior such as suicide.

People dealing with the emotional weight of bankruptcy must be encouraged to pass through the entire process of grief: denial, bargaining, depression, anger, and acceptance. This popular model, posited by Elisabeth Kubler-Ross (1969) outlines at least the general pattern of behaviour a grieving person goes through before beginning a state of recovery. Below is an example of the grieving experience of a bankrupt business owner.

1. Denial

The business owner attempts to convince himself that it is not too late to save the business. He may comfort himself by accounting for whatever amount of property he has left. Alternatively, he may tell himself that the company is not a large loss.

2. Bargaining

Having taken into account remaining possessions, the business owner may consider possibilities to acquire new property using the current amount of resources. Another possibility is that the business owner will attempt to strike some form of deal that he believes might bring his company back under his control. Behavior in this stage may be dangerous if acted upon, as the business owner may be unable to objectively consider all aspects of the bargain.

3. Depression

The business owner experiences what psychologists call “learned helplessness (” This means that having experienced the extremely negative situation of bankruptcy, the business owner may perceive himself to be unable to do anything about the scenario, and so lose motivation to take action even if opportunity for recovery presents itself. This stage is considerably one of the most dangerous, as it is at this point that psychologists have observed people to exhibit the greatest tendency for self-destructive behavior.

4. Anger

At this stage, the business owner becomes able to direct his negative emotions toward specific objects (sometimes the self). This is considered a “blaming” stage.

5. Acceptance

The healthy-minded individual eventually becomes able to process the negativity of the previous stages, and learns that there is no action that can change the past; however, unlike learned helplessness experienced during depression, the business owner becomes aware that in retrospect, there is little point in remaining in the previous stages. It is this at this stage that the person becomes ready to recover.

Because of the way that grieving works, it is difficult for the person to move on to new things until the fifth stage has been reached; in addition, the Kubler-Ross model does not necessarily dictate the order or number of times a person has to pass through each stage to reach acceptance. This varies from person to person. As a result, the path to recovery itself varies from person to person as well. However, by understanding that eventually the average person must reach the fifth stage of the model, the bankrupt business owner becomes more willing to begin the journey from acceptance to starting over again.

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Also, click on the following links to find out more about what to do after reaching the point of acceptance. Included is a true account of a businessman who survived bankruptcy.




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Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API


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