There is a moment – as the full realization of debt out of control hits – when, at least metaphorically, the knees buckle, the head swims, and the urge for flight swells to an almost irresistible force.
This is the ‘Moment of Panic.’ More exactly this is the start of a very long moment of panic. And for quite a while it will return in short bursts. And there is every reason to have such a Moment and such moments. For you have no idea what lies before you, and no idea what mess you are in. You have, after all, never been there before, and probably don’t know anyone else who has either.
I say the Moment! Savor it, milk it, stroke yourself with it! Soon enough you are going to come to your full shaken senses. Then you will have to handle matters coolly, calmly and thoughtfully.
While in The Moment:
- Make no decisions
- Sign no papers; and
- Don’t try to make reason of anything.
To do any of certain, you must be as bright and as objective as you can manage. During your Moment you are not going to be that.
The panic is fed, of the route, the reason of the whole world falling on your head, of fingers pointing at you in the street and of being cast from your home to ramble the streets begging crusts from strangers.
Or maybe even of being thrown in prison and breaking rocks in some cold and hostile place.
Well in England and Wales at least this last is not going to happen. There are only two situations involving debt that can lead to prison here. One is where rates are involved, and unless you are withholding rates on principle, it is unlikely that this will happen since there are probably other problems that can be addressed.
The other is where you have committed fraud, and if you have done that you are not going to be reading this article. Having bad luck, being silly or being ill is not fraud. Losing your job is not fraud, suffering the effects of inflation is not fraud. Being old is not fraud. And having a mental disorder is not fraud.
You are not in a debt crisis because you chose to be. Something has happened since you took on the loan, and – in England and Wales at least – your creditor is expected to take that into account and negotiate a solution.
There is a structure of priorities which places those things you need to live as priorities and most loans as non-priority. But there are some difficulties where you own assets, especially a house, which requires a lot of thought about how to go forward.
Since it is a priority to have accommodation and mortgage or rent are priority debts, it makes no sense for mortgage lenders to repossess in many circumstances, and that is very much so in a weakening house market. For, unfortunately, while you possess the house, the mortgage is a separate debt secured on the house. Repossession of the house does not clear the debt, and the money received from selling the house may be far less than the mortgage figure.
If the lender places you in a position of having less money available he is cutting off his nose to spite his face. For you to stay in that property paying rent and looking after the property makes more sense, especially if it is by reviving the mortgage when things pick up again. An idea worth exploring at least, if it is needed.
BP bonds have now fallen in cost significantly following the leak in the Gulf of Mexico. The downturn is giving a sign that BP will soon default on its debts according to many analysts. Although shares are beginning to show signs of recovery the bonds are still falling steadily.
Rating agencies are now threatening to cut BP’s credit rating and even threatening more downgrades as they wait to see what the full extent of the spill in the Gulf of Mexico will mean for the company.
Many of BP’s investors are restricted from owning lower grade bonds and therefore if BP suffers any more cuts the investors could be forced to sell their shares.
BP revealed last week that it had cut a faulty pipe from the leaking source which will hopefully make a big difference to the spill.
Even though recent happenings have shown a lot of negativity surrounding BP, it is clear that the company still has a good investment grade credit rating. The current AA rating was described as being ‘a very strong rating,’ by BP spokesman Mark Salt this week.
BP owes £14bn in total debts, whereas stock markets currently value the company at £84bn which means its debt levels are very low currently.
Investors in the shares such as many UK pension funds now fear that BP will cut their dividend as a result. The next dividend meeting is set for July 27th, which means a wait for many.
Lots of room for negotiation – once you are over The Moment of Panic. Similarly with other debts whether secured or unsecured. In all cases what makes sense can usually be agreed.
Though sometimes you have to argue your corner pretty strenuously. And if all these possibilities are at the back of your mind in Your ‘Moment of Panic’ you will be less likely to rush to decision or signature. For that period keep out of the water, there were many sharks.