Is Bankruptcy Immoral?

Hint: It's Not a Question of Right or Wrong

Reading this piece published by the Christian Science Monitor, you'll find two sides in the debate - and one big gray area in between - when it comes to the question of whether or not bankruptcy is immoral. And though the Christian Science Monitor quotes people who identify as being of the Christian faith, the debate on whether bankruptcy is "right" or "wrong" concerns all people who are overwhelmed by debt.

There are few people, after all, who take the matter lightly.

There are a few major types of bankruptcy, but for purposes of this article, we will focus on personal bankruptcy, which generally falls under Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code.

The Right and Wrong Debate

Those who feel that bankruptcy is somehow wrong or immoral point to the beginning, when the person first agrees to take on credit card debt and runs up the balance. The Christian Science Monitor quotes personal finance professional Mary Hunt: "I would say, 'You accepted these credit cards. You had the obligation to know what you were getting into. [...] You spent the money, and sure you had a big medical bill, but it probably would not have put you over the edge had you not already been deeply in debt."

In other words, arguments like these squarely blame debtors for getting in over their heads. Those who make these kinds of arguments suggest a kind of financial tough love, or belt-tightening. They claim that debt repayment - after agreeing to take it on in the first place - is unequivocally the right thing to do.

On the other side of the argument are those who believe that there's nothing inherently wrong or immoral about bankruptcy. The Christian Science Monitor quotes bankruptcy lawyer Jonathan Alper: "The people whom creditors often solicit are high-risk customers with considerable vulnerabilities." Alper says that debtors aren't on "equal footing" to begin with, which makes the contracts themselves immoral.

So, in a sense, those who think bankruptcy isn't wrong or immoral also point to the beginning, where what has happened is the loss of a job, a serious accident or illness resulting in significant medical bills, or other personal calamity.

The Beginning of the End to Overwhelming Debt

Ultimately, the decision to file for bankruptcy is something that only that person can do, in consultation with a lawyer, and will have to figure out on his or her own whether bankruptcy is right or wrong. Probably the best answer is that it's neither. It's not a question of right or wrong. It's a question that you answer on a case by case basis, looking at all the facts and circumstances surrounding the person overwhelmed by debt.

It is only within that context that you determine whether bankruptcy is the right thing to do under the circumstances. That said, people do find that there is life after bankruptcy, and it can mean a life free of worry and struggle. As one woman quoted in the article said: "I must have paid way over $20,000 for a $5,000 debt," referring to the interest that piled on through the years. "I wish I had done it a lot sooner."