Are Paying Debts a Moral Obligation?

Posted by Kevin on July 9, 2012 under Bankruptcy Blog | Be the First to Comment

Most experienced bankruptcy attorneys know that there is a moral consideration in filing bankruptcy.  We know that many clients wrestle with the idea of whether it is morally right for them to file.  Books are written about the bankruptcy filings of famous Americans through the years for the dual reasons of demonstrating that filing bankruptcy does not necessarily make you a bad person, and also to demonstrate the moral ambivalence that confronted these  famous people when they filed bankruptcy.

You could consider the choice whether or not to file bankruptcy to simply be a “business decision.” Merely a weighing of the costs and benefits of filing and not filing.   For many people, that is as far as it goes (and I do not have a problem with that).  After all, corporations of all sizes file “strategic bankruptcies” all the time. Their very smart and well-informed managers decide that bankruptcy is the best way to reduce debt and streamline their operations, so that the business can survive and hopefully thrive into the future.

And who doesn’t want to survive and thrive?

But for you, it may not be that cut and dry.  You consider yourself more than a business. More than a corporation. For you, the human costs and benefits have to be added into the equation.

For many people, the decision to file bankruptcy is more than a business decision.  For many, that’s where morality comes into the decision. We humans are moral creatures. That means that our important choices include the moral assessment of the situation.    If we don’t engage in the moral component of this choice, we may experience something akin to “buyer’s remorse”; that is, after the fact we look back and  say to ourselves, “why did I do that”?

So what do you need to do to make a good moral decision?

First, accept the choices that you made—good and bad, sensible and short-sighted, intentional and forced—and review the circumstances that got you where you are now. Accept that you made a series of legal commitments to pay your debts, consider how much choice you had at the time about them, and in hindsight what you could have done differently, if anything. Analyse honestly why are you now not able to keep those commitments?  Is it because you lost a job or because your spending habits, especially in the area of non-necessities,  are out of control?  By analyzing choices made, you are not only assessing whether to file bankruptcy, but you are putting yourself on the path not to repeat your mistakes.

Second, consider both the financial  costs and benefits of  bankruptcy versus the  moral costs and benefits of continuing to try to meet those financial commitments.  Yes, you can get my debts discharged.  But, how will your family, friends, co-workers view you in the future.?  Am you being an honest debtor or are you gaming the system?  Or will it be viewed that you are gaming the system? Do you have a realistic chance of successfully paying off your debts, and even if so, what would be the likely human costs while doing so?  And if you do not have a realistic chance, how do you weigh the benefit of putting up a good fight against the costs that come from just delaying the inevitable?

Third, recognize that you now have both the opportunity and obligation to make a good decision about whether to continue trying to meet those commitments. To just accept the status quo without facing the situation honestly and bravely is making a decision by default, which is likely neither your morally best nor practically wisest move.  In other words, you should control your destiny rather than destiny controlling  you.

Fourth, get advice so that you know your legal options. You cannot make decisions, whether business or mixed business and moral, without knowing the facts and the law. An experienced bankruptcy attorney not only knows the law, he or she knows what you are going through.  More importantly, an experienced bankruptcy attorney can guide you to bankruptcy alternatives if that makes sense for you.  You may have the best of all intentions, but with your hours at work cut back,  lots of debts, and bill collectors badgering you at work and home, bankruptcy is probably your best and only realistic alternative.  On the other hand, you may be a candidate for debt consolidation through a reputable non-profit debt counselor.  Or you may have enough equity in your home to get a second mortgage and consolidate your debts.  Finally, filing under Chapter 13, where you pay back a portion of your debt, may be economically feasible and fit into your notion of fairness and morality.  One size does not fit all.    An experienced bankruptcy attorney can put you in a position to make the right decision for you and your family.