We were at the cusp of a new era in finance when the old system nearly collapsed last year. Then the government bailed out the old system and it could go on its merry way having been rescued by us taxpayers. There is still no meaningful reform and the bankers are paying themselves just as exorbitantly as ever, although they are not lending to us with the money we gave them to personal injury solicitors from our taxes (or more likely our childrens’ and grandchildrens’ taxes).

Nothing about these recent major financial events however seems to impact my clients’ feeling of guilt, remorse and shame when they need a bailout. They don’t see the connect between themselves and GM and the banks and how its all part of the same financial system. I’m not saying there is a domino effect necessarily, I’m just saying the same imbalances can occur regardless of scale and the type of financial entity. Our system encourages leveraging your finances and few are the individuals and companies that can resist the temptation, or keep the leveraging within sustainable boundaries. Those enabling the leveraging (the finance companies and counter parties to leveraged transactions on the secondary markets for debt) are only recently looking at what those boundaries should be.

The pendulum has swung from promiscuous lending to eschewing any risk at all. Risk, however, is why lenders are paid interest. The happy medium of prudent risk taking by lenders is still a way off. Banks don’t have bankruptcy. They get put in receivership or get bailed out by the government if they are “too big to fail.” We people do get bankruptcy when we we’re financially stuck. Most of my clients became over-leveraged when lending was indiscriminate. However, they were not necessarily being irresponsible themselves, as they often assumed the lender had done their due diligence on their ability to repay

So this is a time of de-leveraging and could you find a better place than LeverLaw to de-leverage? Ok, bad pun that puts a serious point at risk. Everyone is de-leveraging now. What goes up must come down applies to finance too. If bankruptcy is part of a fiscally prudent plan, just like it was for GM, there should be no shame in it for your household or small business.