The morality of bailing on debt...

Great Debates
41

Well, even if you are no longer reading this thread, the record really should reflect not that I was trying to insult you but trying to figure out exactly what your attitude was. Which I still haven’t.

Don’t let the door hit you on the way out. And do not make it sound like you personally were taken for a $150k ride. You say that you work for a management company. You do not personally own the property. Where was your loss? And does your agency not have vacancy and nonpayment insurance?

Also for the record, my firm represents clients who are out not $150k, but $1.5 billion. Don’t come crying to me.

MR

42

I had posted:

**
To which you responded:

**I was agreeing with Bob Cos and Telemark when I posted - partly in response to your post to this effect:

**
Excuse me if I misunderstood your post. It seemed to me that you were simply shrugging your shoulders and saying, in effect, “It’s your own fault for lending to a deadbeat, not the deadbeat’s fault for being one.”

** I am sorry to say that I don’t believe you. If any lendor can always recover his losses in every bankruptcy, on time and in full, I don’t see the advantage (to the debtor) in declaring bankruptcy. How is it that a person who cannot pay his debts can magically come up with a plan in which all his creditors are paid without suffering any losses?

My understanding (IANABankruptcyL) is that the plans you mention call for repayment of some debts over a longer period and at a lower interest rate than that to which the original debtor agreed. The only reason most lendors accept such plans is because their alternative is to collect less or nothing. And of course, even for secured loans, the creditor has to accept back (for instance) a used car of considerably lesser value than the new car originally sold. So it is disingenuous to pretend that those who accept some settlement in lieu of the original debt have suffered no loss.

My point is that no rational creditor would enter into a restructuring agreement to be repaid less than expected unless the alternative was less still, or nothing. And a contract entered into thru coercion is not morally binding, IMO.

I believe the OP had to do mostly with personal bankruptcy, not business. To those who say (not necessarily you, Maeglin, “Oh, don’t worry - it’s a big corporation and no one really gets hurt”, I simply respond 'Enron".

** Taking things without paying for them and without permission is my definition of theft. How this equates to borrowing money at an agreed-on rate of return, and paying it back, I do not see. Interest on a loan is payment for the use of the good. Bankruptcy is making use of the good without paying for it. I would call this a form of theft. Possibly inadvertent in many instances, sometimes justifiable as the least of several evils, but not at all equivalent to charging interest.

Unless, again, I do not understand your point.

I also posted:

**

And you responded:

** You will pardon me if I mention that you seem to be doing exactly what I recommended. How clever of you!

Would you recommend that those who are in the business of lending money (or providing goods and services for delayed payment) also make no effort to enforce their debts, and never to lend money in significant amounts?

It would be difficult to secure a mortgage if they did.

As regards the OP, I would still say that someone who borrowed money or received goods and service in the past, could not or did not repay the incurred debts, declared bankruptcy, and then later reached a position in life in which they could repay their debts but didn’t -

Is essentially saying, “Sorry, sucker. I already screwed you. I could make good on that - but I just won’t, because you can’t make me.” Yes, I would say that was an immoral action.

Please understand that I see the need and the value of bankruptcy. The idea is not to allow debts to completely ruin a person’s life. Certainly I see the value of allowing a fresh start, and a chance to recover from past mistakes.

But a person who could pay a debt, but won’t - yup, that’s stealing.

Bottom line is to pay your credit card balance in full, every month. If you can’t do that, don’t use the card. But nobody is holding a gun to your head and forcing you to borrow money. That is a choice of your own.

Regards,
Shodan

43

I think we are largely in agreement on several points, Shodan.

.
No, it is not one’s own fault for lending to a deadbeat. It is still the deadbeat’s fault for defaulting on some sort of agreement. Shayna appeared to be raging against the unfairness of it all, to which I simply shrugged. Yes, sorry, it sucks when people don’t pay. But in any business in which contracts are made, it does happen.

Naturally this does not always happen. It depends entirely on the nature of the bankruptcy and the state of the corporation before and during the bankruptcy proceeding. But it does happen.

I was working on a matter today of an extremely large company that just came out of bankruptcy this week. My firm represents the official committee of trade creditors. The company’s books were so strong that the creditors decided not to take the cash they were owed at all. Amazing, huh? Instead they opted for notes with stock conversion agreements. The conversion agreement allows the creditors to immediately convert their entire debt to company stock. This releases the debtor from having to pay an enormous cash debt and gives the creditors the ability to make a windfall off of the bankruptcy. They are trade creditors: they bought pieces of bank debt on the margin from banks who were unwilling to sit out the bankruptcy process. And now they have the potential to hold a ton of equity in the company and the potential to make a real killing.

Billions of dollars in bad debt is traded every day just for this purpose alone. Lenders, especially banks, usually lack the expertise, the patience, and the reason to sit out the entire bankruptcy process.

It entirely depends on the settlement. Often the interest is paid in full, of course, up until the date of the voluntary petition. And for a large company, the depreciation of capital assets is not so relevant. Enron’s 17k miles of oil pipeline, its $8 million Raytheon corporate jet, etc have not depreciated because they are used. And if the collateral is real estate, the lender is also in a position to gain from doing virtually nothing.

The reason most lenders accept lesser plans is because they are quicker and involve less risk. It is easier to calculate short default proceedings with a marginal debt collection than it is to calculate boom-or-bust returns from a drawn out bankruptcy settlement.

You are right, the OP was about personal bankruptcy. I have switched to corporate because I know a bit more about it. But a moral obligation is a moral obligation, no? Contracts are signed both by people and by corporations.

And I would equally dismiss such claims that no one gets hurt when big corporations are involved. Lenders don’t print the money themselves. For all I know, Chase sank some of the money in my investment accounts into Enron.

I do not view it as theft because default provisions are inevitably in the contract itself. Knowingly abnegating one’s loan responsibilities is definitely theft. But just as you recognize that you must pay interest for use of the good, the lender recognizes that there is a chance that he is never going to get his money back. Hence he will try to levy as much interest as possible against this chance. It is a delicate balance.

If you intentionally defrauded your lenders, then yes, it is immoral. If you were rendered unable to pay your loans back and reached a bankruptcy settlement in which both you and the lenders agreed that a lesser sum would satisfy the debt, then I simply cannot believe that you are still obligated under the first contract. It may be a good thing to do, and it certainly is a nice thing to do. But other than pride, I am seeing no justification for *obligation[/i.

Agreed. My credit is in good shape. Debt and bankruptcy are not pretty.

FTR, I am not an attorney, either. I am a legal assistant at a large bankruptcy firm. I make no pronouncements about the law whatsoever. I just work with a lot of bankruptcy documents, specific corporate financials, legal pleadings, etc. My firm represents parties owed hundreds and hundreds of millions of dollars in Enron, Kmart, and other bankruptcies of staggering size.

It is depressing work.

Regards,
MR

44

Excuse me while I choke on my coffee scoffing. Don’t get me wrong, I’m a lawyer myself and often make money out of my client’s need to hire me due to their misfortune.

But do I seriously understand your point here to be that you can empathise equitably with those who (personally or via their employers)have lost lots of money due defaulting debtors because you are provided with gainful employment due to the fact that your clients have lost big bucks?

The tears rolling down your face bear a remarkable resemblance to those emitted by a crocodile.

All your talk of frankly exceptional cases in which creditors have done well out of bankruptcy are purest red herring. The simple facts are:

1/ business people allow for the risk of defaulters because they have to, and that has absolutely no bearing on whether or not it is or is not moral to default.

2/ the creditors of defaulters generally lose out bigtime. That some exceptional cases may exist is neither here nor there. I dare you to even whisper the nonsense that in any significant number of cases the creditor loses out because they didn’t have smart enough attorneys or didn’t do the right deal. Quite simply, 90% of the time (or more) there is not enough money to go around. Period.

3/ Creditors make deals with defaulters because they have to. That the defualters have left the creditors with no option but to accept a deal worth less than what they are owed in full does not mean that it was morally right for the defaulters to have put the creditor in that position.

Maeglin, your world weary, “deal with it”, “get over it”, “don’t come crying to me” rhetoric may be appropriate in terms of practicalities, but seems to me not to have much relevance to moral questions.

45

Well, since I seemed to have inspired the ire of Krispy, I’ll give a shot at the rest…

I must say that avoiding one’s debts, through default or bankruptcy is morally wrong. there is a range of “wrong,” and this isn’t necessarily the moral equivalent of murder or out-and-out fraud (unless the default or bankruptcy is done fraudulently), but I tend to try to look at it from both sides before making the judgment.

From the side of the defaulter, I see how things can happen outside of a person’s control, and while one may want to pay one’s debts, it sometimes happens that that is not possible.

However, from the side of the defaultee, I see that that person has expended effort and capital to provide the service or product that the defaulter received. They now are at risk of defaulting on THEIR debts (OK, maybe not a HUGE risk, but a tangible one nevertheless).

All in all, IMHO, the defaultee has the winning argument.

They “assumption of risk” argument I find specious for two reasons:

  1. While creditors often “accept” that risk of loss through default exists in any transaction, this does not absolve the other party from their obligation to give to that person the bargained-for value of their product or services. Perhaps I’m being hyperbolic, but I see no LOGICAL difference between that and arguing that the fact that I “accept” the risk when I get in the car that some of my fellow drivwers may be drunk, thus increasing the risk that they will hit me somehow absolves that driver from any moral responsibility when they DO hit me.

  2. Those creditors do not “swallow hard and make it go away.” They pass it on to their other customers, who will pay a higher cost because others got that product or service for free. In another thread, inspired by Krispy’s ire at my suggestion that Credit Card Companies charge more because they face higher risk, Philster responded that this amount is only 1-1.5% I acknowledge Philster’s expertise far beyond mine, and my father’s (who, while a bank president in the '70’s, has been out of the field since 1981), and will accept that number, though my gut instinct is to cling to my suspicions. Even so, if the load on each non-defaulting customer is 1-1.5%, that’s 1-1.5% that those people are paying, and it isn’t right that they should HAVE to pay because others have overextended themselves, by whatever cause they find themselves in.

As to the discussion of the relative morality of “having” to default/declare bankruptcy, versus those who get there by foolish choices, it has been my (solely based on anecdotal evidence) experience that most defaults wind up by poor financial management (of which I am fairly consistently guilty). This says absolutely nothing about you, stoid; I know absolutely nothing of your particular circumstances, and certainly do not think that NO ONE who defaults/declares bankruptcy got there by circumstances out of their control.

And FTR, I HAVE been where you stand. When I got out of law school, I had no job, and less than $100 in the bank, with a $750 rent coming due. I couldn’t get a lawyer job, because I still had to pass the bar (which, BTW, cost $400 to sit for). So what did I do? I worked my way out of it. Got a low-paying, but quick job with a temp agency. I’m still recovering from it (it delayed my career a good 4 years). And I honored my debts to the best of my ability. I am still paying for it (I’m still 6 figures in debt), and am probably solvent because of the kindness of creditors and friends. Would it have been easier for me to have declared Bankruptcy? Actually, no. My debts were either secured or non-dischargeable. But I still felt (and feel) that running away from my debts in any way was not merely unpractical, it was morally wrong.

Krispy, IANABankruptcyL. Could you please point me to the Chapter of the Bankruptcy code that doesn’t involve the distribution of the debtor’s assets and/or the assignment of a trustee to manage the debtor’s finances during the debtor’s filing? Chapter 7 filings involve the liquidation of the debtor’s non-exempt assets by the trustee. Chapter 13 involve the creation of a payment plan by the trustee. While the debtor remains the owner of his assets, he is still required to make payments, which are set by the trustee.

Maeglin, I must disagree with what seems to be a central posit to your line of thought that re-negotiating a debt (especially under the threat of Bankruptcy) re-negotiates one’s MORAL obligation (we all agree that it re-negotiates one’s LEGAL obligation). If you thought the product was worth $100 when you paid for it with that plastic, what about the fact that you are prepared to file Bankruptcy and avoid a significant portion of that debt decreases the value of that product? IMHO, one is morally obligated to tender to a person for their product or service that amount that the two have agreed is its worth. The fact that the provider is willing to accept a substantially lesser amount for that product does not indicate that they suddenly feel that its worth has dropped. Nor has it indicated that the debtor feels it is worth less.

46

I don’t understand this at all, so I seriously doubt it is my point. I was trying to put Shayna’s company’s loss into perspective. Yes, I am sorry her company got taken for a ride. It stinks. But it gets rather a lot worse.

Wow, if it’s such a red herring, I am sure you have a cite that will clear this all up for us. Or an explanation why capital & growth hedge funds are so interested in holding on to equity in bankrupt companies, even those with absolutely paltry assets. Go one, show us the proof.

And for the umpteenth time, no one is arguing that it is a “moral” thing to default on one’s borrowing agreements.

At the moment of bankruptcy and well into the proceeding? Yeah. Obviously. That’s the point of bankruptcy.

And that creditors lose out because their representation is below par happens all the goddamned time. Why do you think the committee of unsecured creditors in Enron is willing to pay nearly $50l per day to the firm that represents it? Surely not because it has the most attractive business cards.

Go ahead, I dare you, whisper the nonsense that creditors of Bethlehem Steel aren’t going to see their money back, when the company still has an army of steel-producing plants?

As a side note, in such cases as this, the stockholders probably will get screwed. There is rarely enough money for quite everyone. But I believe we are restricting the discussion to secured and unsecured lenders.

But what is your point? A contract is a contract. If the creditors are not happy with the restructuring and proposed settlements, then they have plenty of legal recourse. There is a very good reason why the bankruptcy process can take a rather long time.

Come off it. Your “default isn’t moral” does not have much relevance to moral obligations either.

If you refinance a loan, are you somehow obligated to pay the original loan agreement at a higher interest rate?

When the bankrupt parties negotiate a settlement, it is still a contract. I am still waiting for someone to tell me how this contract imposes less of a moral burden on the debtor than the original loan agreement. Or how you still have a moral obligation if the creditor himself, the victim, wipes the slate clean.
Redhawke

We are starting to get somewhere.

I consider the problem differently, with perhaps less context. The contract between the borrower and the lender is that the lender offers a service and the borrower pays the number written on the dotted line. I am not interested in how much the good purchased is worth, for it does not change the nature of the contract.

If the number on the dotted line changes for various reasons, under the contract the debtor is obligated to pay it to satisfy his moral obligation. If someone ruins himself with debt by means of fraud of bad financial management, then I think full restitution is a very good thing. If one intentionally defrauds one’s lenders, it probably should be mandatory.

But I believe that if you are going to derive the moral obligation of payment from the original contract document, then any rebargaining has to change the nature of the moral obligation lest the contract lose all force.

Regards,
MR

47

Maeglin -

I think we are in agreement. Sorry if I misunderstood you.

And Stoid -

What is the secret of your success? I could post that I think it is a great idea for Al Gore to sodomize Mother Teresa’s corpse at high noon in Time Square, and I would get three views. You ask about the morals of bankruptcy, and it takes off. Sigh.

Regards,
Shodan

48

I see a fundamental difference here. Your creditor is not obligated to refinance a loan. They have the option to keep the status quo and expect you to pay on time and in full. You have the option to secure a loan with another company and pay off the original debt immediately and have only the new, lower interest debt to repay. The original creditor will opt to refinance only in an effort to keep your business, not because you will fail to repay your debt.

The refinancing of a loan can be compared to paying back the original loan in full, and taking out a new, lower interest loan with the same company. You HAVE paid back your debt, you have also secured a new, differently structured debt.

In bankruptcy, I do not see how it is possible (or at least, commonplace) that the settlement will have you fully paying back all of your original debts. If you could’ve paid off the original debt, why was bankruptcy necessary? The creditor is forced into a renegotiation because you are unable to pay off the debt in full. It is that forced renegotiation that, I believe, still leaves a moral debt on the books.

I will admit that companies being able to write off a bad debt does muddy the waters a bit, though I haven’t wrestled through that completely.

49

Well, I think the consensus is that not paying your debts, if you are able, no matter how much time has passed or what circumstances have occurred (i.e., BK) is morally “wrong”.

However, I think it’s a small sin, (assuming no fraud, of course) and many otherwise upstanding folk commit it.

For myself, I did take a look at repayment. Among my considerations was: "If I pay it back now [10 years later to a completely unrelated party who is only “out” a minute percentage of the original amount), who is helped and who is harmed? The original creditors took their writeoffs and are no longer involved. I cannot “make it right” with them. So who would I be “making it right” with?

And while it might be the moral thing to do, what is the benefit to my doing the “right” thing in this instance? Citibank doesn’t give a shit. “Joe’s House O’ Collections” scores one for the day, and what happens to me? I pay 3 times for the same error: 9 years (9 beause everything fell apart over time, not all at once, stretching out the total period until it was all gone) of bad credit (which impacts more than my ability to get into debt, as most of you probably know), then the actual cash that I owe, Then, * for doing the right thing * , I am rewarded with 7 more years of bad credit. Not to mention the impact that reward would have had on my SO, our business, and our future plans.

All for what? For whom? One way or another, I pay and pay and pay for 18-20 years, and who else is suffering that I have to do this to myself?

Well, the answer was clear: no one. So forget it.

I guess that means I have a practical, rather than a pure morality, but I’m sleeping like a rock.

By the way, ** RedHawke ** , just by way of clarification, I did not deliberately defraud anyone. I was young, had a good job (which I was really unqualified for) with a good salary and was doing fine and getting in debt, like ya do, and I lost the job. I remained unemployed and partially employed for a very long time afterward.

However, I do not blame anyone for any of this. I don’t blame anyone for anything in my life (except my parents a little), because even when we are young and stupid, as I was, we are still the party making the choices that lead to where we are. We can make different choices. I made a lot of choices that led to where I was, and I paid a huge price for those choices.

I don’t regret anything, though. Regret is stupid. I learned from my mistakes, and now I only use credit cards as a convenience, paying them in full. Now I’m older and wiser, I have come to understand that the people who desire credit the most are the people who should never have it. And the people who need it least are the ones who should.

** Maeglin **, after reading all you have to say about the contracts aspect, something occurs to me… It is spelled out in every lending agreement exactly what each party’s rights and responsibilities are, including what happens in the event of a default. The lender may sue the borrower. The lender almost certainly will do damage to the borrower’s credit reports. Therefore, default and its resolutions are * part * of the original contract, and as such, the contract, one way or another, has been fulfilled. From that squinty-eyed view, there are no immoralities at all! :smiley:

stoid

PS: ** Shodan, ** it’s a gift. :cool:
PPS: Interesting side note: I had debts to friends which dated from that period, and I have ** paid all of them back in full. **

HEY! COLORED SMILIES ARE BACK!!! YAY!

50

I think it makes a big difference. After all, paying the debt is about making the lender “whole”, so to speak. And the lender has a way to make themselves whole, via the tax code.

It goes without saying that deliberately defrauding companies is wrong. But the laws make allowances for the fact that…shit happens.

51

so the final position is:

“ok, so it’s morally wrong, it’s not as big of a wrong, say as murder or other really bad things and besides, lots of people do it too, and the other party isn’t always as hurt as they could be, and it would have been really really worse for me anyhow, so while it’s not completely ok, it’s ok enough for me”.

interesting.

52

Pretty much! :wink:

53

Actually Red, you being an attorney and all, can’t you just look up the code yourself? Heck, you probably have access to Lexis or Westlaw…and I don’t anymore.

But anyway, the point is that with a Chapter 7, the courts aren’t going to be, as you say: “controlling your financial decisions for years to come”. If you have assets above the allowable limits, then yes, they’ll be liquidated and dispursed, but then that’s the end of it. Over. Finis. No “years of control”.

Yes, that statement of yours irked me. But what irked me even more was the sugestion that if I were in fact an attorney, that I’d be guilty of malpractice. That was cheap…and incorrect. All of the information I supplied was factual and correct…and…although IANAL, I do (unfortunately) have much real life experience in these matters.

54

Like you need Lexis or Westlaw to read the Code online.

55

Another interesting branch this discussion might take is to come to a more specific consensus as to where “bailing on debt” ranks on the morality continuim…as opposed to say…downloading music…taking a spurious deduction on your taxes…or failing to return a change overage in a retail transaction…etc.

56

I think MGibson has pretty much said what I would say, and rather concisely at that. The idea of bankruptcy is to avoid an enduring obligation, and the difference between what is moral and what is legal is not necessarily trivial but in many cases the motive for making a law is founded in moral concerns.

The point of bankruptcy is to remove the obligation of debt. It isn’t lurking just around the corner, it is eliminated. IMO, my morals agree with the laws on this. It is unfortunate that there is so much bankruptcy declared, but as it stands the debt doesn’t need to be repaid and doing so won’t get you into heaven. If you feel some moral necessity to do so, well, more power to you, but I don’t feel compelled to do anything about it.

57

I’d like to approach this problem from a purely moral standpoint.

The loan is a contractual agreement, which is solidly based in law. The contractual agreement allows for the lender to provide the debtor with money, which is to be repaid with interest by the debtor. In the event that the debtor is unable to repay the principle plus interest, certainly the lender and probably the debtor recognize, as part of the contract, that the debtor will have the legal recourse of declaring bankruptcy. By the point that the debtor is able to declare bankruptcy, certainly both lender and debtor are aware of the legal recourse.

At the time of bankruptcy, either the debtor has a choice of whether to declare bankruptcy or not. If he has a choice, declaring bankruptcy is immoral because he is purposely producing a negative outcome for the lender for his own benefit. Let us therefor assume that the debtor has no choice but to declare bankruptcy.

Now we have a negative outcome for the lender, but the debtor is not directly responsible for it. Perhaps the debtor had no choice but to declare bankruptcy, but made immoral decisions which lead to an inability to choose to avoid bankruptcy. If the debtor consciously or subconsciously recognized that his financial decisions would ultimately lead to bankruptcy, then the debtor was immoral when he made these decisions. So let us now assume that the debtor was completely unknowning that his decisions would lead to bankrupcty. Only if this is the case – in essence, if the lender is more knowledgable of the risk of bankruptcy than the debtor – is the debtor not morally culpable. In many, many cases of bankruptcy, I believe that the lender is actually morally responsible for the bankruptcy, since the lender has a better understanding of the risk than the lender.

If the debtor is morally responsible for the bankruptcy, then he is morally obligated to make reparations, regardless of the law. First, he should repair the financial damage to the best of his ability, and second, to the degree to which the damage cannot be repaired, he should take steps to prevent further bankruptcies, both by himself and others.

If the lender is morally responsible for the bankruptcy, then the lender is morally obligated to make reparations to the debtor where this is possible, and to the degree to which the damage cannot be repaired, should take steps to prevent further bankruptcies by future debtors. This likely means being more exclusive with lending, and/or improving the terms of the agreement for the debtor.

An example of the lender being morally responsible is when the debtor cannot conceive of the consequences of the terms of the contract. Frequently, the interest itself can be the driving force leading to bankruptcy. If the debtor cannot grasp this force intellectually (and the lender certainly can) then the lender is morally responsible.

Certainly, in either case, the debtor is morally responsible for taking steps to avoid future bankruptcies, as is the lender.

58

From a moral point of view I think there is a certain “pool” of goodwill and we should contribute to it.

In my younger years I have done things which cost people money. I crashed my father’s car and never paid for it (since I couldn’t). I drew from society’s pool (in the person of my father). I often feel an obligation to help and onate, not to any person in particular to whom I would feel I owe anything, but to humanity in general.

If you did not pay your debts in time because you couldn’t, even if now you cannot repay the original lender, even if it would make no sense to repay the original lender, don;t you have a moral obligation to contribute that money and more (interest) for causes which would help others in need? That’s the way I feel.

59

Well perhaps it wasn’t, but it certainly sounded like you were suggesting you were worse off than she. If your point is just that her company’s loss was not as big as the loss some of your clients have suffered, big deal. No doubt your clients were bigger. They must have been to have lent the $1.5b in the first place. I still think your remark was insensitive, not to mention irrelevant to the OP.

I have the personal proof of being a lawyer for 12 years. What cites have you offered? I can say that in all that time, I have seen perhaps one bankruptcy that paid of creditors in full. A couple that have paid small (few cents in the dollar) dividends. And the rest complete crocks.

The problem here, I suspect, is that you are talking about very large business, and secured lenders. Which are the exception. And not what the OP was about, which was small personal bankruptcies, which would (certainly in this jurisdiction) outnumber large corporate bankruptcies ten or even a hundred to one. You perhaps do not get that impression because you are clearly dealing in your business life purely with the big end of town.

Exactly.

And how many (by percentage number) of bankruptcies have sufficient assets to pay those sorts of dollars? One percent? All the rest are little guys like Stoid, whose banktrupt estate would not support such fees for a minute, let alone a day. Purest red herring.

Whisper the nonsense that a case like Bethelehem Steel is an average bankruptcy. It may be where you work, but there would be dozens of guys like Stoid who go bankrupt for every Bethlehem Steel.

Finally, we see the light. Why do these stockholders not appear in your posts? Why do you see them as some sort of footnote? Because you are limiting your arguments to a few unrepresentative big guys, when nobody else is.

No. They don’t. That is the point. Very often, they have the options of the devil or the deep blue sea. A bit of money in the hand now, or a slim chance of more later. Or not even that.

You are looking at this as if because something is legal, that is all there is to it. A contract is a contract, you say. I agree. That’s what it is. Nothing more.

Don’t understand this sentence.

No, because the lender has agreed to renegotiate, and had the option not to do so.

It has been explained dozens of times in this thread. If you haven’t got it by now, you are not going to.

You are being internally consistent here. I appreciate that. But I think that for many people, myself included, morality sits alongside, and does not derive strictly from, the legal contract. In other words, if a family member lent me money, and if there was no legally binding contract to pay it back, I would still feel that I should. And if I got into financial difficulty, and so that family member said (even though it hurt them) “I can see you’re in financial difficulty and have no real hope of paying back the whole sum, just give me back a quarter and call it quits” I might, if I was financially stricken, say yes OK and give back that quarter. You would say, well, that’s it, obligation to pay over. I would say no, they only let me pay back a quarter because they had no real choice, and if I came into money later, I don’t think it would be moral of me to keep my money, while they were still out three quarters of what they lent me, agreement or not.

You seem to operate on the principle that in big business, everything is different, whatever is OK at law is morally OK.

YMDV [Your mileages does vary, from mine]. To me, all the excuses given for not paying back creditors all sound pretty pathetic, and I think Wring summed it up very well in his last post.

60

Princhester

It was irrelevant by no means. Shayna was trying to evoke reader sympathy by listing the details of how her company was harmed and “not satisfied.” I am not particularly interested in these kinds of arguments. Insensitive? Sorry. I guess I’ll burn for that.

I am going to excise most of the rest of the discussion as it has become utterly pointless in light of the question at hand.

You seem to take issue with my use of large corporate examples as opposed to personal bankruptcy. Perhaps you can explain why it makes any difference at all. A corporation is just as obligated, both legally and morally, to fulfill a contract just as an individual is. I draw from my own experience, you draw from yours. But the moral obligation binds parties to lending contracts regardless of their size or composition.

Large business, yes. Never represented a secured lender before.

By volume perhaps, but not by the size of the debt. If anything, it is easier to argue that their obligations are greater since the harms of a large bankrupt company are much more extreme than those of an individual who defaults on his credit cards.

Are you sure you are an attorney? Do people who buy stock in Australian companies sign contracts that guarantee some sort of return? Is a share of stock the same thing as a note, or a revolver? Stockholders are not lenders. Sheesh.

[quote]
You are being internally consistent here. I appreciate that. But I think that for many people, myself included, morality sits alongside, and does not derive strictly from, the legal contract. In other words, if a family member lent me money, and if there was no legally binding contract to pay it back, I would still feel that I should. And if I got into financial difficulty, and so that family member said (even though it hurt them) “I can see you’re in financial difficulty and have no real hope of paying back the whole sum, just give me back a quarter and call it quits” I might, if I was financially stricken, say yes OK and give back that quarter. You would say, well, that’s it, obligation to pay over. I would say no, they only let me pay back a quarter because they had no real choice, and if I came into money later, I don’t think it would be moral of me to keep my money, while they were still out three quarters of what they lent me, agreement or not.

[quote]

I have been internally consistent the entire time, but thanks. :slight_smile:

I argued on the previous page that there is something of a difference between debts incurred to family and friends and debts incurred to commercial lenders. If I borrow money from my parents, there is no written contract, no interest, and my parents really have no recourse in court if I default. I would argue that I am obligated to pay them back in full due to the fact that they lent me the money on faith alone. Even if my father were to wipe the debt clean, I would feel obligated to repay it in full. Whence this obligation derives I frankly do not know. It is a topic worth exploring.

No, I believe this is the case in personal bankruptcy as well. Any time a real contract is signed in which a lender charges for the use of money and has legal recourse to collect it.

Like I said, it is a virtuous thing to pay all of one’s debts, even if one does not have to after a bankruptcy settlement. It is something worthy of respect. But I cannot accept that it is an obligation.

Regards,
MR