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The bankrupt are not like us(?)

Frugal Scholar has been contemplating the Edmund Andrews story with persistent horror, and I must say, his strategy to make hay with his tale of self-destruction is pretty ghastly. At one point FS refers us to Megan McArdle’s discovery, reported in McArdle’s Atlantic blog, that Andrews’s wife established a pattern of bankruptcy and unwise spending habits beginning as far back as 1998, well before the time when we could blame our financial catastrophes on greedy bankers.
Copyright © 2009 Funny about Money 
In a follow-up article, McArdle remarks that the bankrupt are not like the rest of us, referring to a paper by Ning Zhu of UC Davis, who shows that although some bankruptcies result from medical costs, most result from overspending, especially on durable goods such as houses and automobiles. Zhu found that the bankrupt households in his study spent as much as the control households, despite earning far less. In thirty-eight academic pages, Zhu makes the point that most bankrupts fail to live within their means. 

As McArdle puts it, people who declare serial bankruptcy “have very different financial profiles from the average American—less savings, more debt.  When an adverse event occurs, they have no margin for error.”

It’s hard to argue with this logic. While there’s no question that some people fall into the financial tar pits through no fault of their own—catastrophic health problems in a country that provides little or no reliable health care coverage being a major cause—I’ve known several people who have brought themselves to the brink of homelessness. By and large they do it with behavior that is overtly self-destructive, so much so one wonders if it’s a strategy to attract attention and sympathy.

Some people see the profligacy allegedly modeled by Andrews’s wife, Patty Barreiro, as a moral failing. I don’t think so. In my experience, it’s a pathology: a mental illness that needs to be treated with therapy and medication. If you look at the way the sufferers behave, you see a pattern, one they seem to be unaware of:

• a series of self-destructive decisions;
• self-destructive behavior that continues for years;
inability to recognize or pull out of self-destructive behavior;
inability to distinguish between self-indulgence and practical need;
a tendency to set up scenarios that naturally lead to one’s own victimization; 
a flair for choreographing real-life melodrama; 
• appeals for sympathy and help to family and friends, often centering on a specific “target” individual.

Living beyond one’s means is self-destructive; it naturally leads to financial melt-down. Self-destructive behavior is pathological behavior: it’s a symptom of mental illness, not a moral failing. People who experience serial bankruptcies are telling us they’re suffering from mental disorder.

One woman I’m thinking of exhibits an extravagant pattern of feckless financial behavior. When you look at the bigger picture of her life, though, you realize that her financial irresponsibility is part of an even larger pattern of consistent self-destructiveness.

In her twenties, she marries the scion of a wealthy family. He appears, on the surface, to be a good choice, until you learn that he was thrown out of some expensive private schools for his wild behavior and drug abuse.

She stays married to him despite his recreational cocaine use.

She remains with him after he proposes that they engage in a f**k-fest with a group of swingers, which he thinks might be titillating.

They charge up vast amounts on credit cards, much of it covered by his parents, who each transfer the $10,000 a year to their son and daughter-in-law, adding $40,000 a year to the son’s teaching salary. This makes the two appear to be more affluent than they are; they do not save the money—they spend it.

When she begins to speak of leaving him, their home is vandalized and utterly destroyed. Their insurance company pays to gut out the interior and rebuild it, as well as replacing all the clothing and furnishing that were destroyed in the attack. Terrorized, she cleaves to her husband and drops all talk of divorce.

Over time, she grows more unhappy in the marriage and again begins to mouth it around that she is going to leave him. This time she is kidnapped by a group of thugs, driven into the desert, tortured and terrorized. They cut off her ear, torch her car, and chase her into the bush. 

Although the police state they suspect the husband of complicity in this attack, she denies it and flees back to his arms. 

His father buys her a new car and also goes in with her husband to purchase an outrageously expensive house, far beyond the couple’s means.

Despite increasingly bitter and dangerous marital discord, she begins to have children by her husband. She accuses him of raping her but remains with him.

After the second baby is born, the husband states unequivocally that he wants to stop having children. She wants another child. So, she lies to him, telling him she’s on the pill, and deliberately gets pregnant again.

Furious, the husband rejects the third child, refusing to have anything to do with his second son. She stays in the marriage despite increasingly abusive treatment and constant discord. 

The husband takes the two favored children on a spring-break student trip he is supervising for his school. While he is gone, an arsonist breaks into the expensive home as the young woman sleeps with the toddler in her bed with her. He douses most of the house with gasoline, sets up gasoline bombs in the hallway outside the bedrooms, and torches the place. She and the child escape through French doors in the bedroom. The house is a total loss.

Despite the unprovable suspicion that the husband had something to do with this second assault and evident attempt to kill her and his unwanted offspring, she remains in the marriage. The insurer rebuilds the house and then cancels the couple’s coverage.

As time passes, the old man becomes disenchanted with the son’s irresponsible behavior and conceives a violent dislike for the young woman; he cuts them off, leaving them with enormous house payments.

She finishes a degree in nursing, and so the two manage to cover the house payments on their combined salary—just. They continue to spend well beyond their means, racking up thousands on credit cards. They never seem to think of selling the house, which before the bubble was worth well over $600,000; when this is suggested to her, she insists they need the space for their three children.

By now the two hate each other but stubbornly remain together.

He installs a camera in one of the home’s showers, with which he videotapes the couple’s teen-aged babysitter in the nude. She finds the tape and confronts him, but still remains in the marriage. 

• She announces she has kidney cancer and says she is being treated for it in another city. She goes through an elaborate charade that includes cutting off her hair and claiming to undergo chemotherapy and radiation therapy, to which she commutes by automobile. Amazingly, those closest to her seem to buy this story, even though she’s climbing mountains in a local desert park. Not until her sister comes into town, summoned to say goodbye to her, does the whistle get blown: the sister, who has worked for years in medical offices and herself is training to be a nurse, tells their father that there’s no way the woman has cancer. Subsequently, she undergoes a miraculous remission.

She picks up a sh*thead in a bar and begins a passionate affair, going so far as to move her bed into the guy’s house. Still, she makes no move to divorce the husband and continues to live in their house.

She gets pregnant by the boyfriend. This man has shown no inclination to support his other illegitimate child, and he now takes up with another woman.

• She refuses to terminate the pregnancy. She returns to the husband and demands that he support her paramour’s child.

They continue to spend money on expensive vacations and vehicles. Behind her husband’s back, she buys a Toyota Sienna (a $30,000 van), financing it on the strength of her own salary.

They declare bankruptcy. They do this minutes after the law is changed in favor of creditors. As a result, they are forced to sell the house.

That notwithstanding, after the proceedings end the first thing they do is spend three weeks vacationing in San Diego!

When they finally divorce, they go at each other tooth and nail. He, of course, has bottomless pockets—the old man is now dead; the widowed mother is wealthy in her own right and finances the most high-powered lawyers in town. They make a project of destroying the young woman. She fights back, hiring her own high-powered lawyers, who abandon her when she runs out of borrowing power to pay their fees.

• The issue of the illicit filming of nubile young girls comes up in court; through the machinations of her lawyers, it is brought to the attention of the school board, so that the husband is fired from his high-school teaching job. Now the kids have no health insurance. She is forced to take a salaried nursing job to obtain health insurance, leaving her higher-paid contract nursing work.

• She rents a series of amazingly expensive houses, one of them on an artificial lake, each of which costs well over $2,000 a month. When advised that she needs to seek more modest housing, she insists that she needs lots of room to accommodate the four kids. She is evicted from these, one by one. She buys a car, which is repossessed when she defaults on the payments; to take the car, the repo man breaks down the garage door at the rental house where she’s living.

 When advised to raise some cash by selling some of the piles of stuff she has accrued, she refuses to do so.

• Her eldest son, now a young teenager, accuses his father of sexually abusing him. He walks from his home to a nearby police station to report this. Because of the rancor involved in the divorce, however, his accusation is disbelieved by the court, despite the fact that a prior judge had formally ordered the father to desist from his habit of sleeping in the children’s beds.

 She fails to file income tax returns. She claims she thought her husband was filing; in the last year of their marriage, he filed separately. She says she did not know he had done so. That notwithstanding, in following years she continues to file no income tax statements. The IRS inquires.

• As her credit rating drops into the sub-basement, she is forced to rent from a fly-by-night landlord who buys junk houses and rents them, unmaintained. She engages him in a fight over the decrepit structure. In the course of photographing some substandard thing she wants fixed, she steps out onto a second-floor balcony, camera in hand. The rotted balcony gives way under her weight. She falls through the floor to the pavement below, sustaining a life-threatening head injury.

• After she gets out of the ICU, she no longer can work because the resulting brain injury makes it impossible for her to remember doctors’ orders, to focus mentally, or to comprehend numbers. 

• She finds a lawyer who will file suit against the negligent landlord, on a contingency basis. A month and a half goes by and he does nothing. 

• She stays in the substandard house, unable to move or work. As her unpaid leave of absence from her job draws to a close, her health insurance runs out. She is is too incapacitated to deal with the complex issues of COBRA (and does not even know about the ARRA discount, of which her employer does not inform her) and is now helpless, with $5,000 to her name, debt beyond belief, and nowhere to turn.

• Her father tries to take over her finances, get her on disability, and enroll her in the state’s substandard answer to Medicaid. He learns the lawyer has done nothing and manages to hire another lawyer, who apparently is willing to do something for her.

• Faced with a lawsuit, the landlord defaults on the house’s mortgage and allows it to be foreclosed. She receives a notice from his lender informing her she must move out by the 16th of this month: that is 12 days from today.

• She has no credit for another rental; she has no place to live; and she is too ill to move. Her father lives in a two-bedroom house in a retirement community, has no desire to house her and her unruly brood (the older girl is so sexualized that the mother’s male friend refuses to be present in the same building with her without another adult present), and has tickets to leave town on the 16th.

It’s very likely she’ll end up in a homeless shelter, at least until her father can get back into town and get her into Section 8 housing, for which she undoubtedly qualifies. She will have to declare bankruptcy again—if she legally can.

While the most immediate cause of her troubles is profligate spending and failure to live within her means, you can see that this is just a small part of a larger pattern of self-destructive behavior. We have

• an unwise marriage to a man of questionable moral character;
• persistence in the marriage through a series of abusive tactics and mutual misery; 
• apparent inability to evade abuse; 
 inability or unwillingness to flee a man who may have intended to harm or kill her; 
• deliberate spawning of children she could not support; 
 dependency on a hostile husband and, later, on an elderly parent well past the ability care for an adult child and a hoard of kids;
 involvement with a second, even more undesirable man; 
• consistent spending beyond her means; 
• repeated cries for parental help to deal with the self-inflicted results of these acts.

Other bankrupts I’ve known exhibit similar patterns. Like Edmund Andrews, they lack the element of marital abuse, but also like him, they have financial problems resulting from a long series of decisions, many of them nonfinancial, that were at base self-destructive. They do things to harm themselves, and irrational money behavior is only one of those things. 

Has our society suffered some kind of collective madness, with the widespread frenzy for buying outrageous houses, expensive cars, costly communication plans, and wildly expensive electronic gear? I doubt it. Most people are not in bankruptcy. By far the majority of Americans live reasonably in affordable homes; if they’re about to be foreclosed, it’s because of job losses or the crime of being an American with an expensive  medical condition.

My point is that people who experience serial bankruptcy indeed are “different” from most people: they’re mentally ill, made vulnerable by some compulsion to harm themselves. This is not a moral failing. 

The moral failing has been in the greed and recklessness fostered by an intellectually bankrupt political, religious, and social leadership. We are all suffering from an institutional collapse brought about by short-sighted, avaricious, and foolish leaders. That is separate from the individual stories of individual citizens. As usual, because of an institutional failure, the mentally ill and those who depend on them or who have to care for them suffer the most.

Image: Brendel|Signature, Wikipedia Commons

Copyright © 2009 Funny about Money 

10 thoughts on “The bankrupt are not like us(?)”

  1. That story had my eyes glued to the screen with disbelief. I mean, I can believe that you’re being honest, just not that that could be someone’s life.

    This then raises the question: how do you differentiate between intentionally reckless, destructive and selfish behavior and that driven by a mental pathology? The end result may be the same, and it may seem like a superficial distinction but I think it’s important. At least it is to me because of my family.

    I still can’t fathom how my parents raised two children that turned out so monumentally differently when our basic childhoods were about the same.

    In general, they paid more attention to him because they “didn’t need to worry about” me, so he actually didn’t have to act out for attention, he was just selfish and manipulative from a young age. It didn’t necessarily manifest in harmful ways when we were children, but once he was in his 20s, he was completely self-centered, wasteful, destructive, and in many ways, seemed almost delusional in his sense of self-importance. In those years, my mom began to claim that he “couldn’t help it” because he was “mentally weak.” [loose translation]

    I couldn’t buy that. So much of his behaviors were built on his earlier years of getting away with everything; how was I to believe that his financial instability, academic failings, and his almost pathological need to convince everyone that they liked and wanted to help him were anything but a product of slack parenting and a willful desire to be that way? With him, it’s not a cumulative downward spiral with no stops along the way. As long as he’s got someone subsidizing his latest scheme or spending money with him, he’s happy as a clam. It’s only when he’s “down on his luck” that he’s back at our doorstep begging for another chance.

    That’s probably one of the two reasons he’s not a bankrupt: for years, my parents kept bailing him out. And he’d occasionally try to make good on his debts. He’d just run new ones right up again, and I’m sure no bank will offer him accounts ever again, but he always finds a way to rack up debt again. I’d be very surprised if he hasn’t run up his girlfriend’s cards again.

    And yet, despite some very mild responsiveness to my tough-love regime, I can’t wholly discount the possibility that he truly does have a mental illness now. I’m conflicted. I feel like the whole picture would be a lot clearer if I weren’t knee-deep in his muck.

  2. @ Revanche: Well, but think of all the people who have had slack parenting and are not self-centered and willfully self-destructive. And the folks who have had strong, loving parents but still take a long dive off the deep end.

    IMHO, “intentionally reckless, destructive and selfish behavior” is, by its nature, pathological. It defines mental illness. It’s drastic malfunctioning, and the only reason individuals who suffer from this kind of malfunction survive at all is that they exist in a civil society.

    Suppose we consider this sort of behavior in evolutionary terms. Living things have a powerful instinct for survival. A living being — say, a fish or a cockatiel — that engages in self-destructive acts DIES. If it begins that kind of behavior at a young age, it dies before it reproduces, and so in theory self-destructive behavior should select out, over time. So obviously, something is seriously wrong with a creature — human included — that habitually does self-destructive things.

    In a colony of social animals, some protection exists for creatures that engage mildly self-destructive activity. There’s a back-up plan, so to speak. But even in that context, there are limits. The colony loses patience and ejects the creature. Or the member of the group goes too far — in human terms, he or she breaks the law — and is punished or killed. Thus even for a social animal of a species whose members are mutually altruistic within their groups — such as humans — self-centered or self-destructive behavior is counterproductive, especially if the behavior harms or disturbs other group members.

    This particular young woman is alienated from her mother and her sister; because of her disturbing behavior, she has cut off two crucial sources of social, financial, and psychological support. The only person left to help her is her father, and he is too old to provide much help, nor does he want to. He also is sick of seeing her ignore wise advice, get herself deeper and deeper into a mess, and then beg to be pulled out of the quicksand. He is deeply unhappy at and, yes, resentful of the ordeal she is putting him through right now.

    A social animal must have the support of its group. Once it is alienated and outcast, it will die. So, here again we see that self-destructive behavior is maladaptive: it’s not normal. In a word, it’s sick.

    Frankly, your mom may be right: the kid may be mentally weak. Which is just another way of saying mentally ill.

  3. I am speechless. I remember your mention of woman who was tortured in desert. This, I suppose, provides the whole context. I also remember when you spoke about a daughter-in-sin–I thought you were talking about your son’s girlfriend! Luckily, that does not appear to be the case.

    I don’t have any comments, really. This makes Edmund Andrews and spouse look like sane managers of life and finances.

  4. You make some very valid points. I suppose I just struggle to understand how we turned out as we did. It’s not, but suggesting that he’s mentally ill feels like giving up on him.

  5. @ Revanche: To my mind, if a person is mentally ill, he or she can be treated. It’s not that the person is just cussed, lazy, or immoral: it’s that the person needs help. It’s possible that therapy would help the person to stay out financial trouble or to avoid self-harm.

  6. Is reckless overspending mental illness? That depends on what mental illness is. Nearly everybody splurges every once in a while. There’s a gradient between “I can afford it, I’ll just save a little less” to “I can afford it, it’s not like I’m ever going to retire” to “I can afford it, people keep lending me money.” All of these people are valuing immediate gratification over long-term consequences; the difference is the degree. (And it makes sense to somewhat value immediate gratification- the future is risky and may never come.) Your example is at one extreme, and Barreiro is somewhere between her and you, and you can find everyone to populate every space in between those gaps. Where does illness start?

    In your example, I would guess that the woman in question probably has something wrong with her- she’s failed at long-term planning in many areas of her life. The question of illness becomes iffier when you look at people who seem to have everything else in their lives together. Barreiro has not drunk or drugged or overeaten her health away and takes decent care of her children. Why is money and career such a blind spot? I would guess that she was raised to believe that she ought to be taken care of, that nothing in her earlier life contradicted that, and she’s followed that idea to its logical, destructive end. It’s hard for me to call believing a certain commonly held cultural belief is illness.

    • @ synapse: Yes! There certainly is something to be said about cultural expectations. I was about to write “especially for women,” but really, haven’t massive advertising and merchandising raised a certain cultural expectation for all of us?

      The woman in our example was raised by a mother in my generation — and we were brought up to believe that a woman served a man in every way, and the man (a.k.a. “the breadwinner”) took care of her and their children. When I left my husband, at the age of 48 (!), my father advised me to stay for monetary reasons, and when I refused to do so, he looked at me scornfully and said, “Where will you ever find another man?” In his world a woman had to “have” a man to survive…and for my mother, that was entirely true. She couldn’t earn enough to keep a roof over her head. The obverse of that was that the woman did expect, as you say, that she ought to be taken care of, in return for the physical and spiritual work involved in taking care of the man, his home, and his children.

      But our daughters were faced with two new circumstances: first, women in the new generation had no problem entering university programs that qualified them for high-paying jobs and then landing those jobs (the woman in question has earned as much as 90 grand as a burn-unit nurse); and second, the average wage-earner no longer can support an entire family alone, meaning that women not only have the option to earn an income, most have to. So that cultural belief — a woman is entitled to be supported by her mate — has gone by the wayside.

      So…unless you believe that the irresponsible urges inculcated by mass marketing and incessant advertising qualify as cultural belief (and they may!), then you have to wonder about the mental health of an adult who self-destructs financially.

  7. OMG, vh, that life/time line made me just ill – so much potential in all the adults just thrown away. I worry about the children involved; growing up in a toxic family……

    I, too, thought when you mentioned her before that she was your son’s SO. It’s not much better that she’s your ‘more or less’ step-daughter, of course.

    (Threads looks at new DIL, thanks lucky stars…….)

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