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Wednesday, September 17th, 2008

by Theodore Sliwinski, Esq.

Moral Issues About Filing for Bankruptcy

Most people who file bankruptcy are honest and hard-working people who feel terrible about not being able to pay their debts. Many Americans sincerely believe that bankruptcy is immoral or that they are doing something very wrong. As their attorney, I understand how they feel about bankruptcy, but I believe they are being too hard on themselves.

Here are a few reasons why I believe bankruptcy should not be considered to be a moral issue:

1. People promise to pay their bills. People also promise to take care of themselves, their spouse, and of their children. Sometimes tragic events happen in life which make it impossible to keep both promises at the same time. If your family is more important to you than your creditors, then bankruptcy may be the right option for you. It is important to emphasize that you can always repay your discharged debts when you are able to do so at a later time.

2. It has long been established in history that bankruptcy is part of the civilized world. Bankruptcy was first established in the fifth book of the Hebrew Bible and of the Old Testament, called Deuteronomy 15:1‑11. In the Old Testament the first bankruptcy laws were created. In ancient Hebrew law, at the end of every seven years, a person was required to cancel the debts of a fellow Israelite. This law was accomplished in the following manner: “Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the Lord’s time for canceling debts has been proclaimed” (NIV) In the year of 1800, the United States Congress used this law as the basis for enacting the nation’s first bankruptcy code. The first bankruptcy code specified that a person could file bankruptcy every seven years.

3. Many successful and prominent U.S. citizens have already filed for bankruptcy. You will not be the first person in the United States to file for bankruptcy. Walt Disney declared bankruptcy before he created Disney World in Orlando, Florida. If not for the bankruptcy laws, then this entertainment giant would not have been able to achieve his dreams. Moreover, your kids would have never been able to visit Disney World, or watch Mickey Mouse or Donald Duck, or watch the Hannah Montana show.

4. The United States Congress created the bankruptcy laws to help you cope with your financial catastrophe. The bankruptcy laws recognize that when you are overwhelmed with debt, and that you are unable to provide for your family, or to be productive in our economy.  It is very hard to concentrate on your job if you receive 10 to 20 collection calls a day. It is in your best interest, and in the best interest of your family members who depend on you, to give you a clean slate and a fresh start in life.

5. You have probably already paid back your credit card debt through your payments many times over. You have already paid back the credit card companies the principal amount of the monies lent to you. You are simply discharging your remaining debt that consists of “interest” and “penalties.” The credit card companies are just as responsible for causing you to file for bankruptcy. If the credit card companies charged you reasonable interest rates, and if they did not charge you outrageous penalties then you would not be forced to file for bankruptcy.

When you first faced financial trouble, these creditors certainly did not lower your interest rates, or allow you to skip any of your credit card payments. The credit card companies are definitely not understanding or sympathetic to your financial problems. These companies don’t care if you file bankruptcy because they have already recovered any of their losses by charging 18% percent to 30% percent interest rates on hard working Americans. The bottom line is that the credit card companies rake in billions and billions of dollars by charging hard-working families usurious interest rates. The credit card companies are making make mountains of gold from issuing credit cards to hard-working Americans. If they were losing money, then credit cards would be much more difficult to acquire. If you file for bankruptcy, and discharge a credit card bill, then this is very similar to the credit card company losing a single penny.