Is Bankruptcy Morally Wrong?
The Morality of Filing Bankruptcy
It’s difficult for people not to attach financial decisions and even financial health to morality.
When you’re struggling with money, it can feel like a moral failing, especially if you are finding it difficult to pay bills and debts that you owe.
Many people who are failing to repay their debts and may be considering bankruptcy start to feel as if they are committing a moral failure because they made a promise to meet their financial obligations.
But is it morally wrong to file for bankruptcy, or is it just a smart decision that makes sense if you’re having financial problems?
While filing bankruptcy can feel morally wrong, there are actually a number of excellent reasons that make it the right thing to do.
Interest Rates Make It Difficult to Repay Debts
When you borrow money, you pay interest on what you borrow most of the time.
There are a few exceptions, such as if you pay off your credit card debt in full each month or if you benefit from a zero-interest special offer.
However, you will usually be paying interest on your debts, whether it’s a personal loan or a mortgage.
Lenders make money by charging interest, and it also helps them to reduce the risk associated with people not repaying what they borrow.
But having to pay interest on top of the money you originally borrow makes it more difficult to repay, especially when that interest rate is high.
When the interest rates on your debts are making it more difficult to repay them, being unable to meet your obligations certainly isn’t as big of a moral failure as some might have you believe.
In fact, many people argue that it’s those lenders charging high interest rates that are morally wrong.
Lenders Know They’re Taking a Risk
Lenders are aware that they are taking a risk when they extend credit to someone.
That’s why they carry out checks before approving someone for credit.
They want to try and ensure they will receive their money back, along with the interest.
They take a variety of precautions to help them manage the risk that they are taking, from carrying out credit checks to charging higher interest rates and securing loans against your assets.
They know that if you can’t pay up, there are ways for them to recover their money.
Some people can feel like they’re betraying their lenders when they can’t pay, especially when they’ve been with their bank for years.
But, in the end, it’s a financial transaction that both parties agree to, and lenders know the risks that they are taking.
You Didn’t Choose to Experience Money Problems
No one wants to struggle with their finances.
Canadians spend an average of two hours each day worrying about money, but being able to let go of these worries would be an advantage for everyone.
You might plan to repay a debt on time, with a plan to meet all of your payments.
However, as things change and your life continues on, you can find that you’re not able to keep up with payments.
There are lots of things that could happen to make it difficult to repay your debts or even meet the costs of your usual expenses.
From a failing business or losing your job to experiencing an event that you have to pay for out of pocket, your finances can quickly be shaken up and turned upside down.
You don’t want or choose to default on your loans.
Things get in the way, and you find yourself prioritizing other expenses, including vital things like groceries.
If you can’t afford to make the payments, you just can’t do it.
It might feel morally wrong not to pay money that you owe, but there is often little that you can do.
Whether it’s the right or wrong thing doesn’t really come into it when you don’t have a choice.
Your Financial Security Comes First
You might have committed yourself to upholding your side of the contract that you have made with a lender.
However, you ultimately need to do what is best for your finances when you’re having problems with your debts.
Being unable to pay your debts or considering bankruptcy might make you feel bad, particularly if you owe money to a bank or other lender that you have used for a long time.
However, lenders conduct themselves as businesses, not as charities.
They take calculated risks to decide whether they should lend money to someone, and they impose higher interest rates when someone is a bigger risk.
They’re generally putting their own interests first, so it’s important for you to do the same.
You’re the only one who is really concerned about your financial security.
While many lenders will try to be compassionate and might do things like helping with payment plans, their ultimate goal is still that their customers repay the money that they owe.
You should be sure to put your financial health first, and this might mean filing bankruptcy when you can’t pay your debts.
Bankruptcy Provides a Safety Net for Everyone
There are various social safety nets that are designed to support people when they fall on hard times.
Bankruptcy is one of those safety nets, which is there to help you when you are struggling to repay your debts.
It gives you a way to clear your debts and eventually start over so that you don’t have to be overshadowed by past financial decisions for your whole life.
Of course, bankruptcy doesn’t come without consequences.
Filing bankruptcy isn’t something that you should decide to do on a whim.
It’s important to get the right advice and ensure you are making the right decision and choosing the best option for your situation.
A Licensed Insolvency Trustee is necessary to file bankruptcy for you, but they can also take a look at your finances and talk you through what options you have to get into a better financial position.