Is bankruptcy a legal decision or a moral one?

You’ve always been told that bankruptcy is something to avoid at all costs. You think it’s the closest thing you can do to breaking the law without actually becoming a criminal. You think it’s wrong, you feel shame for even considering it, and you know you’d never do it.


That simple question trips a lot of people up. What they realize is that this negative idea they have of bankruptcy is culturally constructed. That doesn’t mean it’s accurate. It’s a social norm, not a realistic portrayal of the financial — or legal — situation.

Don’t moralize

The problem is when you start thinking of bankruptcy as a moral choice. It’s not that at all. It’s a legal choice. It’s a tool you have, just like taking out a loan.

Think of it this way: You probably know someone who swears he or she would never get a credit card. For that person, this is almost a moral decision. He or she is deeply opposed to the idea of debt and thinks of it as inherently “wrong.”

It’s not. Successful business owners use debt properly every day. They use it to generate income and grow their companies. There are some thing you simply can’t do without debt. Businesses have start-up costs. That doesn’t mean starting a business is always a bad idea because you’re going to go into debt.

That debt is just a tool. On the other side of the spectrum, so is bankruptcy. It’s a tool to get out of debt. Knowing how to use both means you’re firmly in control of your financial future. Writing either one off just means you’re neglecting perfectly good options that could get you to the future you seek.

It can be hard to shake your negative mindset. If you’ve spent your entire life thinking that bankruptcy is some unforgivable mistake, you’re not going to cast that off in 10 minutes.

Keep an open mind

But remember to keep an open mind. Ask yourself why you have that mindset. Your creditors, of course, want you to keep it. But why should they define your financial future? Why give up that freedom so that you can stay enslaved to your debt and their ever-rising interest rates for the rest of your life?

The key is to ask yourself where you want to get. Admit that you have made mistakes. Realize that factors exist outside of your control, like unexpected costs and economic trends. Taking all of this into account, is bankruptcy going to help you reach that end goal?

If so, don’t get hung up on the false sense that you’re making a moral decision. Focus on the law, the financial tools it gives you, and how they can help make your dreams a reality.