Friday, November 20, 2009

Bankruptcy is Immoral

I know it's a bold statement, but it's a bold move, too.

First, I am very clear about the legal rights afforded to businesses and individuals as it pertains to filing for bankruptcy. Second, I also realize that some people have no option but to file. When you have NO money and no way to pay for things by which you are obligated, you are left with no other options. As a tactic, filing for bankruptcy is not immoral.

However, refusing to pay (more like re-pay) the creditors consistutes an immoral action.

I completely understand one's inability to repay a debtor in the NOW world. But what about next year? Or five years from now? Or fifty years from now? Therein lies the moral aspect. Because one who chooses and succeeds in filing is saying to the world, "I can't pay you now. Please forgive me. Oh, by the way, I am choosing not to pay you for the rest of my lifetime - even when I can afford to do so."

As more and more Americans resort to the strategy of bankruptcy, the once-strong moral fibers of this nation weaken. Future generations will look back and recognize The Great Recession was a moral one.


  1. I completely agree with this. They should renegotiate their mortgages to maybe a 40 year loan with smaller payments. At least the banks wouldn't have to take such large losses and these struggling banks are effecting all of us.

  2. I see bankruptcy as a "nuclear deterrent" against "morally bankrupt" creditors that might trick the unsuspecting into unconscionable contracts, and then try to enforce them. The ER physician that uses the "your money or your life" approach with a patient, knowing full well that the patient could receive affordable care were it not for the urgency of treatment, falls into this category in my opinion. Even unconscious, the patient taken by ambulance is assumed by law to have given "implied consent" to treatment and can be billed whatever the physician chooses to charge. Here there is no up front negotiation, but faced with the potential for bankruptcy and not getting paid, the physician may negiotiate more reasonable payment after the fact.

    As for those creditors to whom you owe a legitimate debt, you should strive to earn as much of a surplus as possible, then pay them in full once you are able. Of course, this is after looking out first for the needs of your family. It is still immoral to rob Peter to pay Paul, so it's best not to repay creditors until you are confident you won't fall into debt again. Wait at least 7 years after bankruptcy to pay though, since you can't file a second bankruptcy until 7-10 years, depending on your situation. And don't just pay a percentage of what you owe, or legally the creditor will likely be able to enforce the entire original debt from which you filed bankruptcy protection. An alternative might be to take out a life insurance policy and leave your creditors as beneficiaries. But don't tell your bookie or loan shark or they might try to cash in on your policy a little early.