Ghostly Vitality: While you have 0 or fewer hit points, you gain insubstantial.
Case: Player has 10hp. An enemy deals 20 damage to him.
Question: Does the attack leave the player at -10 or -5hp?
What I believe: the damage is dealt at once, taking the player from 10 to -10 without being at -10 to 0hp at any point. Thus, the damage reduction from the insubstantial condition does not apply to the attack.
What my player believes: when the player's health reaches 0, the damage reduction kicks in. The excess damage is then mitigated.
Please provide rule quotes for any answers.