The question of morality in bankruptcy

[beachchick]

I am struggling with the question of the morality of filing for bankruptcy. I know it is the only solution to my unstainable debt problem but how do I deal with the with the moral issue, after all so many of the public has the idea that people who file are basically getting away with murder and off scot-free, most think walking away from debt is immoral, I know in my heart I did allI could to avoid it, but I still feel in some weird way that I am being immoral, any advice?

[ccsjoe]

I felt the same way. My solution was twofold. One I educated myself and my wife about bk, so we could talk about it and consider it as an option without the stigma associated with it. Once we were able to be comfortable with it as another business tool available, we sat down and hashed out our numbers realistically and came to our set of conclusions that led us down this path. Two, the biggest moral dilemma we had was missing our first payment. See, we had perfect payment history, like several others here. Never a missed or late, never, never, never...even if it stupidly meant using needed cash to pay, then using whatever limit was available on the cc to cover for the needed cash deficiency...stupid right? Even more so...up until the very first missed payment, and I mean up until 4:59pm of the due date I was sitting staring at my screen with the mouse pointed to the "make payment" button....I had until 5pm to pay before it was considered late. Come to think about it now, what was inmoral was short changing my family of things we needed (think back to school shopping, etc) in order to maintain our status quo.

You are not being inmoral, you are making a business decision. You have weighed your options, thrown your numbers, projections, etc. This has nothing to do with emotions, although it is an emotional ride...but this is all about a business decision. As such, and being an option afforded to you by the law, how exactly are you being inmoral?

Just my three cents (inflation and all).

[jjim120]

As our attorney said to us, bankruptcy solves the immediate problems. After bankruptcy, if you are fortunate enough to come back from the devastation, you may work out anything you want with the former creditors or anyone else. Whether you get a good paying job or win the lottery, you can then deal with the moral aspects of not being able to pay the bills.

Should we ever be able to pay back our friends who stayed with us and the people who have been hurt by the devastation caused by the con games that forced us into bankruptcy, you can bet that we would pay back a lot of people who were also taken in the con game, including trying to pay as much as possible to the subcontractors and associates who were owed money on the project that they will never see from the con artist bank and new owner that stole the property.

It is just the right and moral thing to do if you are in a position to do it.

[onthefence]

beachchick-

All I can say is that I have been there myself. I will be filing my CH7 paperwork this week and I am past it. This forum has been so helpful for me to understand that bankruptcy is a business decision. It helps to look at it that way - try and take the emotions out of it. We have been struggling to pay our debt load for years and had been scraping by, until DH lost his job. That is when the bottom dropped out for us. It was a difficult decision to file for bankruptcy - we too felt that we owed this debt and had an obligation to pay. When I conveyed this to our cc's (DH lost job, we felt obligated to pay our debts, etc) all they told me was that they couldn't do anything to help (some even hiked up our interest rates due to our new debt to income ratio) and that I needed to continue to make at least my minimum monthly payments on time.

We did all we could to cut our expenses and trim back on all we could. We realized that there is just not enough $$ coming in to cover necessary expenses plus debts. We talked to a CCCS counselor and they actually suggested that we file for bankruptcy. That was hard to swallow - but as I said, these feelings went away. This forum has been a tremendous resource for me - both for the wealth of information and the emotional support it provides knowing that you are not going through this alone.

Yes there is a societal stigma attached to filing bankruptcy and this is why we are not personally sharing with anyone other than a very close few. But know this - no one here will judge, only be supportive and helpful - I know that has been the case for me.

Best wishes.
OTF

[october99]

I haven't pulled the trigger yet as I'm trying to find the right attorney and figure out what we're doing about the house. I think a lot of people who are pushed to bk feel the way you do and it is something that only you can work through in your own way. For me knowledge is power and misery loves company. This forum is great for that!

I do want to mention though that it is not as if there are no reprecussions to bk. Folks who file have to live within their means, operate on a cash basis and go without credit extended to them. They also have the risk of it affecting their chances at a job in the future.

[HHM]

Here are some perspectives

http://methnerlaw.com/2009/09/17/morality-and-bankruptcy-is-paying-bills-the-definition-of-a-hero/

http://methnerlaw.com/2009/06/11/the-unforeseen-event-the-turkey-and-thanksgiving-you-and-bankruptcy/

http://methnerlaw.com/2009/03/22/sunday-reflection-moral-disequivalence-between-debtor-and-creditor/

[chrisdfw]

If you can pay and you don't, that would be immoral.

If you can't pay, its just reality. Lenders make a business decision to lend money and they price such losses accordingly. You make the same decision when you buy bonds and they can't pay, or you invest in stocks that lose money. You aren't stealing from the lenders unless you committed fraud.

You aren't doing anything wrong by seeking a fresh start, you can't pay anyway, you are just admitting it. It would not be moral to allow your family, children, or even society to be deprived of your contributions by suffering under an unsustainable debt load. The fresh start exists for the benefit of society, we all benefit from allowing people a fresh start, allowing people to take a risk and fail, because allowing people to move on lets them become more productive members of society. Without bankruptcy, nobody would ever risk starting businesses if they knew they could end up in debtors prison or a life of poverty when they failed. Nobody would buy a car on credit if knew a job loss would confine them to slavery for life. Even mortgages would be impacted, as few would risk the devestation of an upside down house if there was never a way out.

Bankruptcy is the moral thing to do when you can longer meaningfully pay your bills and contribute to society. Nobody benefits when you suffer un-necessarily. If you can't pay, that is a question of fact, not morality.

We all feel like we have failed to some degree when we need to start over. The real question is whether we learn anything and become better citizens, ready to be productive and free from the harrassment and pressure of the debt.

[onwards]

If you can pay and you don't, that would be immoral.

Why?

There are plenty of situations when this simply isn't true. There's the whole notion of loan covenants, after all.

I think the ONLY place where I would agree with you in a general sense is when you take money from friends/relatives, without interest or even a loan agreement, and then tell them to stuff it even if you can pay it back. THAT's immoral. Taking a commercial loan (which includes your typical consumer loans, such as credit cards) and defaulting, even if by choice, thereby triggering the loan's provisions against default, is perfectly alright in any situation. It is up to the lender to evaluate you as a borrower, and to have proper provisions against your possible default. They aim to make money via interest, after all. Is that immoral too? (if you are a follower of Islam, your answer would be yes, by the way)

[HHM]

I think in a common sense perspective, chrisdfw is correct, if the person actually has the ability to pay debt they promised to pay, and didn't; that would violate just about any moral code that exists. Granted, the gray area in that statement is what constitutes "ability to pay." Personally, I see NOTHING immoral about bankruptcy. Bankruptcy exists because it balances different and competing values. On the one hand, a person should pay debts if they can, but we also don't want people to become burdens on the state or tax payers. Bankruptcy effectively shifts costs; it is difficult to imagine what the U.S. would be like if we did not have bankruptcy (I know I wouldn't want to live there).

[andy158]

My opinion is the people that forced our bk are the ones who are immoral. Cc's (and the banks who held them) increasingly raising interest and minimum payments to embarass a loan shark are the immoral ones. Perfect credit and a score of 720 gave them reason to jack the rates because we had too many outstanding debts and considered a high risk. A high risk of what? Never any missed or late payments. They refused to negotiate on anything and modified their initial contracts at will with no remorse based on current economic conditions (aka losing their a**es in the housing market). They forced our hand and are now getting ony 63% of what we owed. Never again will I deal with the likes of BofA, HSBC, Cap One, etc. We exhausted every avenue for two years trying to satisfy the greed of the big banks. Lots of mental anguish and stress. A great burden has been lifted and we are at least paying a portion of our debt through bk13. I feel not one bit of immorality.

[blockhead]

Morality of bankruptcy? Ha ha! Do the taxpayer bailed out banks who are collecting from us and charging usurious rates of interest have any qualms. It's a business decision both ways. The only moral issue to me would be if was discharging a personal debt .

[ironpirate]

The government and corporations get bail outs all the time, why shouldn't you? And you know who pays for these bailouts? We do!

[cocoasmom]

I wrestled with the morality issue for months--including many, many sleepless nights. In the end I resolved we had done our part, tried to work with the mortgage and cc companies. To no avail. We had great credit, 720 score and no late payments. The reality was I was unemployed and now couldn't pay. They didn't care. Until I stopped paying. Too late, game over. I am excited about life without debt. I will never deal with the big banks again.

[blockhead]

As Thomas Jefferson said:-

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, (Attributed) 3rd president of US (1743 - 1826)

And of course that's exactly what we have, a privately owned Federal Reserve bank.

[BKDebby]

What ccsjoe said. I didn't have to hash it out with a spouse though. When I saw it would take me 40 years to pay off my DiscoverCard, only paying the minimum (and right now that's all I could come up with is the minimum), I knew it was time to quit thinking about trying to save my 780 credit score. My attorney said it's strictly a business decision.

I'm filing next week!