Bankruptcy is such an interesting topic because some people feel a moral obligation not to use it. In their mind, borrowing money means agreeing to pay it back. Something like Chapter 7 liquidation bankruptcy seems to get around this by only paying off a portion and forgiving the rest.
This mindset, of course, is flawed. For one thing, it ignores that bankruptcy is simply a legal process, not a moral decision. Secondly, it assumes that bankruptcy is actually the fault of the person filing. For instance, they may assume that person bought something they knew they couldn’t afford and then filed for bankruptcy, so they wouldn’t have to give it up.
The clear issue with this second point is that frivolous spending doesn’t pay off in Chapter 7. You just have to sell those assets through the liquidation process. You don’t get to keep everything. This isn’t some legal form of theft. That’s simply not how it works.
Additionally, most people file for bankruptcy due to things that are decidedly not their own decisions or choices. For example, medical debt is a top reason for bankruptcy. One Harvard study put it at 62%. Most people who file for personal bankruptcy have these medical bills.
Is that their fault? Of course not. They did not choose to get sick or injured. They would obviously have chosen not to create that debt if they could. Plus, they don’t have much say in whether or not they live in a country that allows this type of medical debt, rather than one with universal healthcare. All of this is out of their control.
Remember, bankruptcy is just a useful legal tool that helps people who need it. Make sure you know how it may work for you.