Randall and Waldner PLLC

With The Exhaustion of Stimulus Benefits, More Citizens Will Soon Be Filing For Bankruptcy

(The Nightmare Of Chaos Theory? - Maybe Not Such A Nightmare Afterall)

Predictably, the U.S. Congress has done very little up to this point to pass effective coronavirus relief legislation despite the resurgence of Covid-19 and the resulting downward spiral of the US economy. At the time of this writing it is perhaps likely that additional “stimulus” payments will be approved. But, in truth, it will be Big Business that will receive the bulk of this freshly printed money to stem any potential losses and effectively maintain their per share stock values. Those of you who are taking the time to read this blog will almost certainly be left out in the cold when it comes to being benefitted from the stock market appreciations.

It appears that Congress will continue to dysfunction, as it has for time immemorial, to effectively govern our Nation and you can expect this trend to continue well into the future. We Citizens are but ideological pawns used in the real Game Of Thrones as Big Business interests battle for position to keep their funds flowing no matter how much that injures the average American. Make no mistake, the lobbyists representing lenders are working overtime in our Nation’s capital to preempt any hint of legislation designed to give meaningful relief to those already financially underwater. As that great comedian, W.C. Fields, would say, “Never give a sucker an even break.” That saying has never been more true than what we are experiencing today largely at the hands of our incompetent government and the insatiable greed of the wealthy. It is absolutely scandalous that the Stock Market plays the fiddle as Rome burns!

With most of the CARES Act relief measures essentially exhausted, many people and their Small Businesses, are cascading over the financial cliff and there doesn’t appear to be any end in sight. What, you might ask, is the face of American Small Businesses of today? The answer from the law firm of Randall & Waldner is each and every one of us is a Small Business, whether or not we’re incorporated and regardless of whether we’re earning a minimal wage paycheck or receiving a hoped-for profit eked out from some entrepreneurial venture. The American Small Business today consists of each and every one of us who get up in the morning to actually do something called “work.” Health care workers, transportation drivers, administrators, consultants, teachers and child care specialists, gig workers, bar tenders, restauranters and staff, just to name a few. And yes – even attorneys and their co-workers are part of the American Small Business.

America’s Big Businesses can always find the money they insist is necessary to continue doing their business-as-usual thing. The “Too Big To Fail” approach is now applied to virtually all Big Businesses whether or not they are deemed “critical” to the general welfare of our Country. And all the while they’re receiving bailout assistance, they are using these funds to maintain their multi-million-dollar salaries, supported by golden parachutes when they make mistakes and need to slip out the back door, while the people that work for them struggle to support their families. The effects of the massive government “stimulus” can be seen in the stock market returns where, because of the printing of money by the Federal Reserve, virtually all market risk has been removed as more and more of the newly printed funds spill over into the financial markets. The Fat Cats are getting rich while the lowly working class has to go begging.

What a sweet deal it is being rich – one can take a wild ride in the so called “risk markets” and, if wrong, the government will come by and bail the company out. There is virtually no real “losses” in the financial marketplaces these days and the stock market valuations attest to this truth. Instead, there is simply the unbridled multiplication of our money supply in the economic bailout theory commonly known as “Quantitative Easing.” Our politicians are intoxicated by it while the Federal Reserve Bank admittedly has no other methods of dealing with our looming economic catastrophe other than the printing of money.      

Well, here’s the deal – America’s Small Businesses need to step forward and rid themselves of the chains of the Money Changers. The situation can best be seen from a simply example – let’s say that you are hopelessly in debt that can (1) either be completely discharged; or (2) can be levered such that the amounts and timing for repayment can be reduced and/or extended by negotiations with the Big Business Money Guys. As long as that debt can remain on the lender’s books, it looks like an asset that can and will be further leveraged in the market while, in truth, you’ll never be able to pay that money back even if you had 2 lifetimes to do so. So, a worthless debt represented to be someone’s asset is inherently dishonest but this make no difference to the company that can go into the market place and raise additional funds. Hiding the “valueless” and calling it a “receivable” is a lie that will be perpetuated forever if given the opportunity. While your credit report slanders your reputation, the guys that put you in that position are raising money from the funds that the government is quantitively easing into the marketplace. The result is that the holder of the worthless receivable is paying big salaries and injecting huge sums of cash into the pockets of lobbyists to convince our Congress to deny you a bailout while amassing a combined government debt that is now larger than our entire Gross National Product.

This example continues – let’s now assume that you file for bankruptcy and become free of this debt by way of discharge. This simple act has now required the lender to reclassify its “asset” as a “loss” to be written off entirely. Because of this, the lenders who got you into your mess find it now just a little more difficult to belly-up-to-the-bar to get infused with another shot from the Quantitative Jug. Essentially, your bankruptcy just made the financial markets a little smarter as a chain reaction forces the lenders to get a little more careful in their activities despite always being bailed out. Who knows, maybe if enough Small Businesses lose their debts the lender’s officers and directors will be forced to strap on their Golden Parachutes and get out of the exploitation business.

But for you, you’re free! Free to now get your head back into your Small Business; free to fully support your family in this hour of its greatest need; all the time paying taxes to our state and local governments to pay the salaries of essential personnel (your neighbors) and to throttle back the harmful effects of Quantitative Easing. Someone has to recognize the losses and it shouldn’t be you. So, while the losses written off are sad for someone, you’re not the party still holding the hot potato when the music stops.

Wouldn’t it be nice if our federal government could actually pay off from its revenues the incredibly massive debt that this Country owes? Of course, but that would require the Congress to live within its means – something that isn’t likely to happen until they are all voted out of office because of their complacency in this national tragedy that we find ourselves in. This, however, will never happen as long as the current system is allowed to remain in place; as long as worthless debts are still classified as some lender’s asset. So, how should you feel about going bankrupt? Well, incredibly, the answer is Great and doing so represents for many people the only thing that resembles a patriotic act.           

Now, here’s the rub. As this sad news is sinking into the publics’ consciousness, the trend for a rush toward the exits has already begun. And don’t kid yourself – the Big Business Lobbyists are already anticipating that eventually you’ll get the word and they are moving toward the passage of new laws binding you even further. Bankruptcy inquiries are increasing to a never before seen level and it will be but a short time before the courts begin to feel the effect of all the new filings that have entered into the system. That inevitably means delays in obtaining approval for your Chapter 13 reorganization and/or delays in receiving your Chapter 7 debt discharge.

Consider the incredible magnitude of these dynamic social forces. If one were to look solely at the unemployment filings of the past 6 months (now having reached historical levels not seen since the Great Depression of 1929-1933) what should be obvious to all is the very likelihood that the bankruptcy legal system has begun a freefall where the first in line will be the first liberated by discharge. While the last in line may never be liberated if the Lender Lobby has its way. Will the Lender Lobby ever get to the point where they command our Congressional men and women to pass legislation to remove the gold from your teeth? They would try if they thought they might get away with it.  

If you think that sounds impossible, just remember that you thought it impossible a few months ago that a simple virus would shut down the world’s economies. It’s Chaos Theory’s “Strange Attractor” in application which is defined as “a dynamic kind of equilibrium which represents some kind of trajectory upon which a system runs from situation to situation without settling down.” [1] Yeah, we’re in the middle of chaos to be sure.

 We will be discussing these and other concepts in more detail in Randall & Waldner’s further blogs. So, read on and stay informed.    

[1] Crossman, Ashley. “Chaos Theory.” ThoughtCo, Aug. 27, 2020, thoughtco.com/chaos-theory- 3026621.