For all of my life and especially through my financial struggles the assumption that money troubles are tied to morality and that people with debt troubles are somehow morally broken or moral failures and need to repent at their very hour of need, persist. It’s a false belief that haunts nearly every single soul that has fallen into the pit of dark claustrophobic and oppressive debt.

Since I began helping other with debt problems in 1994 I’ve heard the same refrain over and over again, “But I made a promise to pay my creditors and I have to make those payments.” I hear you but I’ve got to say, “Or what?” Seriously, what’s going to happen if you don’t for a bigger and more important reason? Will your children be ripped from your arms while you sleep, will Bank of America stop making loans, or will you be judged and damned to hell for your inability to forecast the future and get it right?

The moral view of promises is rightly felt. We are taught as children that we are to keep our promises but those promises are about cleaning our room, not cleaning our room ten years from now with interest. And we cast guilt on those that make a promise but can’t keep it by calling them a liar and we are supposed to think less of them. Nobody wants that to be the impression of their existence. So because of incorrect thoughts during a panicked time in our lives we simply make some really bad decisions.

I remember feeling the same guilt as many others do when I landed in bankruptcy in 1990. I felt like a loser, horrible, and a man that had failed to honor his promises to creditors. “I made a promise and dammit I’m going to keep it,” I thought. What I didn’t know at the time was the second sentence that went with that feeling. I forgot to add, “Even if it means hurting my family and leaving us in a worse situation.”

I wondered what God would think of me for being a financial screwup and funny, I never worried about what God would think about me making creditor demanded minimum payments I could no longer afford on terms that basically left my wife and daughter homeless.

It took years of helping others and years of contemplative introspection to look at this issue of bankruptcy and morality with a different view. In retrospect a good swift kick in the ass and a year of therapy working through these twisted issues I built in my head would have allowed me to find similar answers in a shorter period of time. But leave it to the person all screwed-up to know what’s best. Oh yea, and then there’s the issue that I was so broke and without health insurance that paying for therapy was entirely out of the question.

And it may surprise you to learn that this debt, bankruptcy and morality issue is entirely complex and basically simple, all at the same time when you view it from outside the black hole of momentarily imploding debt that feels as if it will swallow your soul, whole.

Many hundreds of generations of people have embarked on unimaginable life journeys that end in servitude and slavery to pay off debts, including in some cultures debt bondage that lasts for more than one generation. Sadly debt servitude is not a lost practice and still exists today in many distant and remote locations. It is estimated that 27 million men, women and children are today serving as sexual or labor slaves because of debt.

The most common form of servitude today is debt slavery, in which a person becomes held as a laborer on a farm, or as prostitute in a brothel, or as worker on a factory floor after accepting a loan, or transport, or another form of assistance from a “lender.”

The lender is a slave owner or trafficker, often tricking laborers into working for little or no pay, making it impossible for them to escape their condition. And the enslaved, Cockburn writes, have nowhere to turn.

“Such captives the world over are mostly helpless,” Cockburn wrote. “They are threatened; they live in fear of deportation; they are cut off from any source of advice or support because they cannot communicate with the outside world.”–Source

Is slavery to repay debts moral? Is selling your children into lives of servitude a respectable or reasonable way to repay the debt from last years farm failure because it didn’t rain? Is it moral to sell your child into sexual slavery to pay the bill you can’t afford. Somewhere right now someone is say it is reasonable and they’re doing it.

So you see there is a moral slippery slope of what is appropriate to deal with problem debts. Somethings we’d never consider as appropriate, while others do every day. But if we want to judge our financial situation with morality it must be done in shades of grey, not black or white.

If we flash forward to a modern capitalistic society the issue of moral failure from bankruptcy is only applied to individuals. Corporations are rewarded for filing large complex bankruptcies to reorganize their financial state to get back to operating again.

Think about the restaurant chains with hundreds and hundreds of stores that file bankruptcy to keep them open and hopefully earning a little bit and that keeps a lot of people employed. Is that a good thing or a bad thing?

But people are not big chains and what’s good for business and a wise move is feed to consumers as wrong and people are wrongfully manipulated into an opposite course of action that serves others through continued payments to creditors or through paying a debt relief agency to attempt to resolve the problem.

Hell, do you have any idea how easy it is to twist the mind of a fearful debtor? Pretty damn easy. Scammers and hucksters do it all the time for their own financial gain. They directly tell you or make you feel as if bankruptcy is only a last resort in order to promote their solution to extract a portion of currency from your wallet.

Let’s examine the transaction made by an individual when they enter into a promise to repay a loan or credit card.

Let’s say I was to borrow from you a cup of sugar and promise to repay it tomorrow. The chance of me repaying the sugar are high and it is a transaction with little risk. Not much is bound to happen between the time I borrow the sugar today and I make arrangements to buy sugar tomorrow and return the cup full.

But let’s change the transaction and say the deal is that I borrow $10,000 today and make a promise to repay the debt over the next 120 months in equal monthly monthly installments.

Here is the problem. The likelihood to forecast the conditions tomorrow will bring are very high. The likelihood you will be able to forecast your economic conditions over the next ten years is murky at best. Frankly it is only possible to do so by bringing in an actuary and extrapolating odds and chances of what will happen to a pool of people in a similar situation as yours, but not your individual life.

You can guess at what you’d want to have happen but nobody really knows what is going to happen. And a lot can happen in a decade or even a year. Your employment situation may change outside of your control, you may be struck with an unexpected illness, war may break out, a global economic recession may ensue, etc.

When a lender makes a loan one of the factors they consider is their risk in getting repaid. They already know some portion of people are not going to be able to satisfy the obligation. That risk is built into the cost of the loan for all in the interest rate component. If some people default within the range estimated, the lender still makes the forecasted profit.
The extension of the loan is not a moral affair between a commercial lender and an individual. It is a business transaction that is supposed to result in one outcome, profit.

When a lender makes you a loan they do not make you put your hand on your religious text and make a moral pledge to repay. They ask you to sign your name and enter into an obligation to repay is in accordance with these terms and the law. It is not a moral transaction. It is a legal contract.

There is not a hint of morality in the business exchange. The only allegiance the lender has is to their profit or to make shareholders happy, not to place you in a perch of moral uncertainty. If the transaction was based in some requirement of morality then why doesn’t the lender ask about your marital faithfulness, theft of pens from work, how much you help the less fortunate, or if you cheat on your taxes.

The only moral component that comes into play in a failed financial transaction is our internal feeling of failure to honor our promise. But in many small ways don’t we already do this every day?

When you obtain a driver license you enter into a promise that in exchange for the license you will conduct ourselves in accordance with the rules of the road. Is not coming to a full stop before turning right a moral failure? Is it a lie or a damnation against our future lineage? How about knowingly exceeding the speed limit by 7 miles per hour. Is that a moral failure?

Is there even a definitive difference between a moral failure and a failure in general? I realize I keep asking a lot of questions but introspection and an examination of these complexities requires you to consider a number of issues so you can come to a healthy conclusion.

Is it more moral to strand your family in an unsafe living condition where you are barely making ends meet for years on end and unable to save for emergencies so you can continue to struggle to make your minimum installment payments? Does your moral responsibility first extend to others before your responsibility to yourself or your family?

STOP And Think.

Think carefully about that question for a moment. Morally, do you put your duty and responsibility to a credit card company before that to keep you and your family safe and prepared for tomorrow?

The inability for people to make payments as they agreed is based in an inflexible agreement that would only be successful in a perfect world without unexpected life interruptions. That ten year repayment agreement assumed a lot of things; that employment would be secure, wages would rise, that harvests would be robust, that working conditions would continue to get better and that there would be no outside interference in your ability to make the monthly payments. That’s a lot of wishing isn’t it?

Agreements between individuals contain flexibility. If I was your neighbor or known member of your community I’d listen to your change in circumstances and we’d work out a resolution that made sense. That resolution might even include a forgiveness of your debt.

But creditors and credit card companies are not Phil down the street, they are instead large process driven organizations that conduct themselves with policies and procedures that result in inflexibility by their own choosing.

Their lack of accommodation occurs by the regulatory framework they must operate under and the incredibly high cost that would be incurred by treating each loan as an individual agreement to be negotiated separately.

Creditors or more so debt collectors only inject morality into the transaction when they want to collect it. They do this for one reason, to manipulate you into repaying. Remember I said how easily debtors could be twisted.

“If you were a respectable person you’d honor your promise to repay,” the collector may say. But isn’t the flip side true as well. If the lender was a respectable entity they’d recognize that circumstances have changed and there are now hurdles currently prohibiting you from making your minimum payment due even though you want to? They’d work with you. But the lender wants absolutes in an uncertain existence. Life just isn’t always that pretty and predictable as much as they wish it to be.

There are popular figures on radio and television that proclaim bankruptcy is to be avoided at all costs. There are certainly many debt relief websites that say that very thing as well to promote the product or service they are trying to sell. In fact before my enlightenment about bankruptcy I once felt the same way. I no longer do. I’m not afraid to clearly say, “I was dead wrong.”

Bankruptcy is a natural cleansing of the necrotic financial remnants that linger following an unfortunate event. It is a path to the resurrection of an otherwise doomed situation. The sweeping forgiveness of debts can be found in many, if not all religious texts. In fact if we can forgive sins, can’t debts be forgiven as well if need be?

How is it that I can ask God for forgiveness of some moral failure and it is forgiven but some feel they must struggle for years and years to make unmanageable payments to creditors to avoid a moral failure. It just doesn’t add up with close inspection. One of those assumptions or beliefs is not true.

I’m certainly not suggesting that your intention should ever be to take on credit with the intention of defaulting. But the idea of clearing debts to start over goes back nearly 6,000 years. It is a long historical tradition that is meant to accomplish one thing, freedom from an unreasonable condition and the ability to start over to do better and learn from the misfortune. Debt forgiveness has meant a breaking of tablets, tearing of contracts, or the destruction of records but all efforts accomplished the same goal, to free people and give them a legal second chance.

The forgiveness of debt was important enough a condition that our the founding fathers of the United States of America wrote it into our core documents without any attachment of morality.

The Congress shall have Power…To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; (United States Constitution)

Let’s flash forward again to modern day. A family is struggling to make ends meet. They’ve been selling all they could on eBay to get the mortgage payment together and the retirement accounts are now drained in an effort to morally meet their promises to repay.

But is that really the highest moral road or just one created out of a lack of clarity over this difficult subject and an inability to come to terms with this difficult subject?
If we are to view the situation in moral terms, is it more moral for a family to spend itself poor and rob the very retirement funds set aside to care for them when they can least afford it, thus potentialy casting them on the mercy of future public coffers when they may not be able to feed themselves?

At some point the ability for a family to stand up and say they need to address the situation in a logical and terms focused way, as was used to enter into the agreement, is more moral.

Interestingly bankruptcy does not rob people of the ability to honor their promises to repay their creditors. All bankruptcy does is provide the debtor with the flexibility they need to repay their creditors in accordance with what they can afford today and not based on what was hoped for eight years ago. That is if they so desire to do so. Going bankrupt places no limitation on your rights to repay your creditors the debt that was legally discharged.

Least we lose sight that like the contract that was signed to enter into the loan, bankruptcy is a mutually legal process and sanctioned under the law as a second chance and fresh start for people without an otherwise reasonable chance to recover from their financial misfortune.

So let’s turn back to a comparative question. If I said you had two choices to pick from to make your debt go away and give you the opportunity to learn from your financial mistakes and move forward, would you sell a loved one into some type of slavery or file bankruptcy?

Let’s put this morality issue into proper perspective. The bottom line is that in a number of different and various constructs, bankruptcy is not a moral failure and in reality has nothing to do with morality at all. It may be the most reasonable, levelheaded, and logical path to follow.

And unfortunately there is no permission slip I can issue you to remove doubt and moral fear from your consciousness as you consider bankruptcy. Dealing with those emotions will be your chore but keeping in mind all I’ve said here will help you to come to a clear, rational, and sound decision that is not based in half-baked assumptions.