The Morality of Bankruptcy

We are often confronted in life with moral or ethical dilemmas that require us to choose one value or belief over another. We may be torn, for example, by the desire to tell the truth but also a need to protect our loved ones from harm. These conflicts in values are common in everyday life, but during times of financial strain it is actue and real.

The desire to pay debt is real; it is part of American culture and, as I have previously blogged, a major reason for the credit systems we have in this country. This moral duty to pay is a powerful motivator to people and for many their credit score is a sort of scoreboard of their success and financial stability.

When financial difficulty strikes, however, another set of moral dilemmas is created. Many Americans facing bankruptcy are supporting not only themselves, but also families and loved ones — and the duty to provide and need to survive is powerful. Debtors in trouble are therefore positioned such that they must either fail in their moral and legal duty to pay creditors or fail to provide for their families and survive. It is a horrible position to be in, and the reason for the shame and embarrassment some people feel during a time of money troubles.

This is complicated further by our cultural taboos and secrecy regarding money. Even within families, money matters are routinely hidden even among loving relatives. These taboos in turn prevent many people from seeking help within their support system.

You don’t need an attorney to tell you how to live or how to feel. But I can tell you that the moral dilemmas faced by debtors are real and powerful — and not reciprocated. Your creditors have no compunction about turning up the heat on you. But beyond that, recognize that the bankruptcy law requires you to pay what you can (if anything) to your creditors. You won’t be “getting away” with anything. You will be provided a reasonable structure to repay your debts as you are able, and then receive a permanent end to most debts at the conclusion of the case via the bankruptcy discharge. This in turn will allow you to have peace of mind and restore some sanity to your situation. This relief is real.

The answer is this, then: in times of serious crisis, you don’t have the luxury of hand-wringing over moral issues. If it is a matter of sanity and survival, then focus on the practical realities, assess your own excesses (if any), and resolve to use the fresh start of bankruptcy to right your financial woes.