I've worked with dozens of economists during my career, and their inability to recognize sunk costs that are staring them in the face is astounding.
So given that they'll just not even get back to zero net worth if they stop, the "better" option is to continue. Despite the negative dollar value standing next to it.
That's something that's just not considered here. When it comes to net worth, -$1000 has exactly the same consequences as -$99999999999 for that individual. So if you're going to be negative anyway, why not be as deep as possible ?
For society, that is a very negative outcome, but not for the individual. But the individual chooses (even in societies that like to pretend otherwise).
I'm not sure I follow your point... -$1000 could be paid off in a month. -$99999999999 probably couldn't be paid off in 100k lifetimes.
That's one thing people keep forgetting about, for example, take population figures. Species specifically refuse to multiply unbounded. And that's weird the first time you realize that DNA contains a distributed regression algorithm that estimates to what size the population of it's species can grow under the current circumstances and then blocks reproduction, or enables asexual (or otherwise really fast) reproduction. Why ? Because if you get it wrong, population numbers will fluctuate.
And that seems "what's the problem ?". Well the problem is that there is a very special number, called "zero". And if the population of any species randomly fluctuates, it might randomly hit zero. And then it's over. There's no coming back from zero. Then you will realize that the number where that happens is not actually zero but can in fact be quite large a number and you see why fluctuation is an extremely undesirable property.
So for debt you can't pay, "zero" is the magic number. Once you cross it, your mission in life changes. It's no longer to get out of debt, but rather to get in as deep as you possibly can, while refusing any and all attempts to get back out (except of course to deceive others to let you get deeper in debt). That behavior by itself is the only thing that might get you back out of debt (just look at the president)
And in economics in general you should keep in mind that while individual humans are stupid, large groups of humans are incredibly good at finding optimal Nash Equilibria. If large numbers of people "randomly" or "out of stupidity" do something, fact of the matter is that the stupidity is yours, for not seeing the whole picture. Stupidity at large scale only exists at very short timeframes, if at all. Lots of people going into debt is not stupidity.