Addressing the Physical and Emotional Stress of Forbearance

by Bob Cohen
Ohio TMA News – September 2012

Stress of Forbearance

The owner of a middle market business has owned the company for a number of years and his entire equity and savings are tied up in the business. The company has lost money four out of the last five years and to keep the business afloat, the owner has taken all of the equity in personal investments and assets and reinvested that cash into the company to keep it alive. His senior secured lender walks in one day and hands the owner a forbearance agreement requiring the owner to engage a turnaround professional or Chief Restructuring Officer (CRO). This is the beginning of a process for the company owner that is likely to place more emotional and physical stress on both the owner and the owner’s family than they have ever experienced in their entire lives. It is the responsibility of the turnaround professional or the CRO to coach the owner through this process to maintain a balance between work, family and personal well being to maximize the best possible outcome for all parties impacted including the creditors.

Clearly, the turnaround professional or the CRO (the “professional”) will instinctively address the financial, legal and organizational aspects of the situation, with a strong focus on the concerns of the creditors. This article discusses the steps that a professional should consider taking with the client to address the client’s physical and emotional condition, as well as the physical and emotional condition of the client’s family, since this can have a direct impact on the outcome not only for the client, but for the creditors as well. This is not an article suggesting that the creditors should “lighten up” on the debtor, but is focused on what actions the professional must be taking in assisting the client through this highly stressful process.

Scenario 1—Health

Stress is a killer! Whether affecting the heart or some other part of the body, going through forbearance is one of the great stress creators to the business owner. The last thing the business owner wants to hear from his new professional is to relax, when the owner is looking at potentially losing everything that the owner views as valuable—the business! Some true stories:

  • A stressful late morning conversation with the senior secured lender is followed by lunch. Upon returning from lunch, the business owner has a heart attack while parking his car and drives right through the wall of his building.
  • Upon telling the owner’s 72-year-old spouse about the problems at work, she has a heart attack and dies that day. One month later the owner dies of a heart attack as well.
  • After losing control of the business the owner continues to have uncontrollable digestive issues throughout the day making it impossible to work every day.


Scenario 2—Family

Often times the owner does not even tell the owner’s family that there is a problem at work. The owner may be embarrassed. Sometimes the owner finds it humiliating, as the owner believes that the spouse will not understand and ask for a divorce. The owner is concerned that the children may find out, causing the children concern for security and well being. As the situation at the business gets worse, it becomes even more difficult to tell the family members the problem for fear that they will be upset that they had not been told earlier. Some true stories:

  • The senior secured creditor has demanded to take the owner’s home as collateral. The family home is titled in the name of both the business owner and the owner’s spouse. The business owner had not previously informed his spouse of the problems at work, and when requested to sign the assignment document, the spouse for the first time hears of the problems in the family business—the business that the spouse’s grandfather had started forty years earlier. The spouse not only does not sign the assignment, but leaves with the children and files for divorce.
  • The business owner elects not to discuss the details of the problems at work because the owner does not believe that the spouse will understand, and of course is embarrassed by the situation. As a result, the business owner chooses a member of the staff at work as a confident—discussing in detail the personal problems he is facing with the company. Before long, the business relationship turns into a personal relationship and ultimately the spouse of the business owner becomes aware of this relationship, resulting is the loss of the owner’s spouse and children in a bitter divorce.


Scenario 3—Substance Abuse

In some cases, the pressure of forbearance is a catalyst for the business owners to turn to alcohol or drugs to relieve the pressures associated with a financially distressed business. The consequences of heightened usage of alcohol or drugs as it impacts a business owner’s ability to make effective decisions both at work and away from work are obvious.

Issues associated with health, family and substance abuse can be considered merely collateral damage of a failing company. Creditors and the shareholders of creditor companies are concerned with profitability and a return on their investment. As a result, employees of the creditor companies must take action consistent with profit directives of the organization regardless of the collateral damage associated with a customer that may not be able to pay its debts.

Therefore, the burden of addressing the issues of health, family and substance abuse must fall upon the professional. He or she needs to take appropriate action to keep the business owner focused through the process in making effective decisions in the best interest of the creditors. In extreme situations, the owner can be removed from a management position within the company, which may be an appropriate action. However, it is the owner who typically knows the most about the business and how it operates. To completely remove the business owner from the process can place an additional layer of risk in maximizing the recovery for the creditors.


Within the first week of the engagement of the professional by the client, the professional must meet with the business owner to explain that the forbearance process will be one of the most stressful times of the business owner’s life. Furthermore, the professional must explain that it is his or her responsibility to assist the business owner in making effective and appropriate decisions for the company, and to achieve those objectives, the professional wants to assist the owner’s ability to focus upon the issues that will be facing the company in the coming months.

The following issues should be addressed with the owner in the first week of the engagement:

  • How is your health?
  • When is the last time you had a complete physical?
  • When is the last time you had a stress test?
  • Do you have any issues with alcohol or drugs that you would like to discuss?
  • Have you informed your spouse of the status of the company and what has been the reaction?
  • Do you have a special personal relationship with any of your employees that you would like to discuss?
  • Are there any other business, health or personal issues that we should talk about that would cause you to lose your ability to focus in upon making the right decisions for the company?

The professional should not hesitate to recommend to the owner to seek help from medical or mental health professionals for any problems identified. Further, the professional will need to offer advice or referral as issues appear later in the forbearance process. Should the professional fail to address these questions very early in the process; the professional is exposing the business owner to further collateral damage. In addition, failure to address these questions very early will also result in the inability to maximize the recovery for the creditors. The burden to address these issues must be upon the turnaround professional.