© 2016, revised 2020, by Ann Babiarz & Associates LLC, all rights reserved.
If you find yourself falling down a financial hole towards a chaotic situation, can you be proactive and choose to play defense? Can you make a rational, measured decision to breach a contract? Can you choose not to defend a lawsuit, even knowing that a judgment may result, if you are essentially judgment-proof?
Are there social stigmata from walking away from responsibilities? Does it impact your religious beliefs if you did so? Do you feel that your own moral standards, or the mores of your community compel you to stick with a bad deal, or pay what you borrowed? These are all difficult questions and ones I don’t answer for you. But I do raise them for your consideration.
What can be definitively analyzed is what the current political, economic and social structure within the United States allows. Unfettered capitalism permits us to act in our own best interest, believing markets will self-correct to allow resources to be allocated most efficiently. These are the rules under which we are compelled to operate. Whether you impose your own additional rules — again, from moral, religious or other core beliefs you hold — is up to you.
Playing defense is a viable strategy, not only to recover from tumultuous times, but to contemplate as a planning technique if you see trouble ahead, or to understand as a possible tactic should you ever find yourself in dire straits. Simple awareness that you have the right to breach agreements, albeit with certain consequences, is power.
What about playing offense? Ordering your financial affairs to make yourself a smaller target for potential litigants could be wise. Knowing your exposure to contract or tort lawsuits by booking a consultation with an experienced debtor-creditor attorney may be part of your asset protection plan. Proceeding without advice can be perilous, as there is a critical difference between legitimate asset protection and a calculated defrauding of current or potential creditors. Engaging in the latter may have dreadful consequences.
Questions you need to ask are related to what problems could potentially crop up in your personal or business life and what your exposure is to them. This is another case where knowing the right questions is key.
Having some basic knowledge in advance will make analyzing the decision to break an agreement — whether you may choose to default on a mortgage like some did in 2008, breach a contract your business has with a customer or supplier under the current, challenging COVID economy, or play chicken with your cellular phone company over humongous cancellation penalties — simpler. You will also be prepared with the potential drawbacks to your actions. The “no consequences card” rarely exists in real life.
There will likely be a financial downside. There may be damage to your reputation as well. Your credit score may bottom out and it may be years before you can purchase certain items utilizing anything other than hard-earned cash. Obviously, you need to weigh the consequences carefully.
Rest assured that a lot of successful business owners don’t sweat walking away from a contract when it makes sense to do so. Professional athletes hold out for a better deal. Even in the cellular phone world, companies now offer to pay your cancellation fee to the provider whose contract you breach, essentially encouraging you to do so.
Defense or offense? Upon which side of the ball should you play? I can’t answer the question for you. But I hope I offered you some more food for thought.