Is Bankruptcy Unethical? No, And Here’s Why
Many people who are far in debt and struggling with finances simply refuse to consider bankruptcy. Not because they can’t file, or because they don’t qualify for bankruptcy. Instead, they don’t want to file because they consider bankruptcy to be immoral, or unethical.
Certainly, your personal morals and ethics are yours, and everybody is entitled to their own personal choices. However, there are some things you may want to consider, if you are wondering whether bankruptcy is moral or not.
Bankruptcy is in the Constitution
The first thing to know is that the framers of the constitution, the founders of our country, understood how important bankruptcy was because they specifically put it in the constitution. That’s right—many people aren’t aware that Article 1, Section 8, clause 4 of the constitution says that Congress has the right to enact “Uniform Laws on the subject of Bankruptcies throughout the United States.”
It is hard to believe that something so fundamental to our country, our constitution, could contain bankruptcy if bankruptcy was considered unethical.
Think of bankruptcy as a form of equality; a stick that equalizes the power between you, and big banks, creditors, or lenders. These creditors have the right to do way more to you than you do to them. They can sue, take property, take your wages, force you to tell them what property you own, and have the sheriff take your property to satisfy a judgment.
You, on the other hand, have the power of bankruptcy. Bankruptcy is what keeps creditors from pushing you too hard to pay debts that you can’t pay. Bankruptcy is what makes creditors “come to the table” to negotiate with you. Without bankruptcy, what incentive would there ever be for creditors to negotiate reasonable repayment terms with you?
Bankruptcy May Help Creditors
Although individual creditors won’t admit it, some creditors may actually like bankruptcy. That’s because although bankruptcy may wipe out what you owe right now, it also does something else that helps creditors: It frees you to borrow more.
Obviously, the goal of bankruptcy is not for you to get into more financial problems right after you file. But at some point, you will be able to borrow money again, responsibly. You wouldn’t be able to do this if you were saddled with debt, and maxed out to your credit limits.
Best of all (for the creditors) is that you can only file bankruptcy every 8 years, so once you borrow again after your bankruptcy, it is highly likely that your creditor will get paid.
Providing for Family
Most importantly, we need things in life that we need to be able to put on credit. Major car repairs. Repairs to our home. Vet bills. Medicines for ourselves and our family. Many of this requires credit. It is hardly unethical to file for bankruptcy, in order to allow ourselves to be able to pay for these necessities.