Is Bankruptcy Moral?

A lot of people struggle with this question. Most people are fundamentally honest and the idea of not paying their just debts doesn't sit right with their upbringing. There is a lot of guilt associated with filing bankruptcy.

Bankruptcy goes back at least to the 14th century. The term "bankruptcy" probably comes from the Italian banco rotta, which means "broken bench." It was the custom to break the bench of a merchant who could not pay his creditors. "Bankruptcy" is also figuratively description of a ruptured bank, with a resulting loss of money. England has had a formal bankruptcy law since 1542.

Even earlier, the law of Moses in the Old Testament called for the sabbath year, a year occurring every seven years when debts were forgiven.

In America, bankruptcy is one of the few laws specifically mentioned in the United States Constitution, which provides that Congress shall have power to make and enforce a uniform law regarding bankruptcy.

The purpose of this historical review is to show that throughout history, humankind has found that a process by which debtors could be released from their debts and given a fresh start has a salutary effect. Bankruptcy is legal and while filing bankruptcy may not be the most desirable outcome, there is nothing immoral about it.