Hacker News Reader

Comment by goggles99 | Hacker News Reader

Debt collection agencies hounding you for years. Re-possessing assets if possible, garnishing wages, placing levy's on your property ETC.

Of course if you file bankruptcy, this all changes.

IMO people should have to pay back money they have borrowed no matter how long it takes. I have known too many people who rack up a bunch of debt with the "I want it now and I will pay for it later" attitude. It is easy to have this attitude when these people can just declare bankruptcy if they get in too deep (as many people I have known have done). With no strong deterrent, of course people are going to be lackadaisical about this.

View on HN

I've known people who have piled up debts that they cannot pay. Being hounded by debt collectors (and avoiding them) just becomes a way of life. Re-possessing assets? I am assuming you mean the asset that was purchased with the credit that resulted in the debt. This wouldn't have to change under the proposed system. There would still be secured loans.

Garnishment and levies? In practice these are pretty rare and costly for the kinds of debt here. You see this more for taxes and child support, not unsecured consumer debt.

Instead, credit dings (chargeoffs, etc.) are the most common result, and that wouldn't have to change under the proposed system. So, there's your deterrent. Those "deadbeats" you mentioned would then not be able to obtain credit. In fact, credit requirements may become more stringent if lenders really perceive risk from "deadbeats" under the new system.

>...the "I want it now and I will pay for it later" attitude.

If anyone needs deterrent, it's the reckless lenders. Marketing works and for years, the mesage from creditors and retail outlets has been "you can have it now and pay later". In fact, some "retail" outfits were nothing but credit providers using (often cheap) products as a vehicle to sell credit. Think Rooms To Go.

And some people are just not as sophisticated as others. So, when selling easy credit in abundance, you are more likely to attract and empower those who are least able to afford it. OTOH, we have an entire industry set up to determine creditworthiness and businesses that sell credit are far more sophisticated than the average consumer, yet somehow it's the consumer who gets in over his head who is the morally bankrupt deadbeat. The creditor is merely a victim, though they still manage to make a profit. And, oh yeah, if the largest of these do get into trouble, because the outsized risk they took for outsized profits finally backfired, then we bail them out and restore their saintly CEOs' compensation to its rightful place in the stratosphere.

On balance, the current system smells an awful lot like a racket.

So, you wanna get rid of limited liability for corporations too?

Because the arguments against limited liability for individuals in the form of bankruptcy laws seem to be pretty compelling arguments against corporate limited liability through incorporation.

Except, of course, that corporations are saintly entrepreneurial wealth creators while individuals are irresponsible scum.

No matter how long it takes? Or until the debtor is dead? Death is an arbitrary line, so why not make bankruptcy the arbitrary line instead? Or maybe the late debtor's family should be liable. What if they just can't pay? Do they have to come and work for you?

The point I'm making is that there have to be limits to a debtor's liability. The question is where the limits are. You can't just say all debts must be repaid.

I think you're both over-estimating AND under-estimating the rationality of people's behaviour. It is important that going bankrupt is somewhat unpleasant. If it wasn't, then normal people, who are somewhat rational, would have no incentive to pay back debt, and defaulting on loans would become normal. However, some people are always going to fail to think ahead and try to borrow irresponsibly. Even if bankrupt people were put in the workhouse and given punishing physical labour, those kinds of people would still be financially irresponsible. That's why the poorhouses were never empty, despite them being horrible places by design. Saddling people with debt forever won't stop irresponsible borrowing. Being broke is already horrible and punishing people harder is unlikely to make them think more rationally.

I'm guessing you're probably a smart person who thinks ahead and makes smart choices - you have to understand that not everyone in the world is like that. Punishing people who are not like that is unlikely to change them. You can't punch someone in the face to make them smart. You can punch someone in the face to make them obey you, but in this context that would mean singling out all irresponsible people and then punishing them before they take out a loan, not after. If you were able to identify irresponsible people then you might as well just not lend them any money.

Which brings me to the real benefit of bankruptcy. That is, if you really want to stop irresponsible borrowing, then it makes a lot of sense to also discourage irresponsible lending. Banks and credit unions are far more rational than the general population. If individuals are allowed to go bankrupt, there is a clear incentive not to lend money to people who don't have the means to pay off the debt. By providing that incentive, it then becomes the problem of the lender to identify whether or not an individual is likely to be able to pay of a loan. The lender is has a lot of information and resources through which they can make such a determination.

Now, different people have different ideas about the morality of this situation. Some would say that it's wrong for banks to take advantage of the irrational people, so it makes sense to provide incentives for responsible lending. Others would say that if individuals are irrational, then they get what they deserve, and banks should only be required to behave rationally. Personally, I don't think stupidity is morally wrong (otherwise dogs would be pure evil), and it's often quite self serving to argue otherwise.

what actually happens when you declare bankruptcy?

Reply on news.ycombinator.com