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saint's avatar

If people borrow money, shouldn't they have to pay it back?

Asked by saint (3972points) October 26th, 2011

Among the several arguments about how to solve the current debt crisis, one is that people who borrow money should be given some special consideration, even forgiveness, when it comes to paying it back. Which means that the people who loaned the money have to suck it up and figure out what to do next. Which means that a a pretty basic moral principle, which is that if you borrow something you are obligated to repay it, is suddenly up for arbitrary grabs.
So does that mean that there really is no obligation to pay back debt? One should only have to do it if it is convenient? Otherwise, one can simply forget about it and let the lender figure out how to pay back their own debts as if it never happened.

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16 Answers

HungryGuy's avatar

Yup! All the banks and other corporations that were bailed out and/or received any kind of corporate welfare by the government should have to pay it back.

saint's avatar

Since the bail out was nothing but a loan package, and since they are busy paying them back, your wish is coming true.

Blackberry's avatar

Sounds great, but it’s a fantasy. What if you need to fund an unnecessary war? What then? What if you spend decades establishing a system where people at the top get so powerful they can simply buy their way out of debt?

Blondesjon's avatar

Yes they should.

I don’t care how easy the banks/mortgage companies made it for folks, who had no business borrowing money, borrow money. I fell in to the same trap and eventually ran my debt up so high that I was no longer able to meet my monthly house payment. Last year I had to walk away from my home of 17 years and let the bank have it back.

I could sit here and cry like everyone else that I was snared by some insidious Wall Street trap but that would be bullshit. The decision was still ultimately mine to sign those papers when they came my way. I also had no problem whatsoever spending the money.

I did the unpopular thing and took a good hard look at myself and my spending habits. I saw what needed to be changed and changed it. My life is dirt poor right now, but, my bills are paid on time and I don’t cringe every time my phone rings. If anyone wants to blame the banks for lending them money with the term that it be paid back, well, I’m going to have to see some video of your bank manager holding a gun to your head and making you spend that money before I take you seriously.

gondwanalon's avatar

If you have weak integrity and self discipline then you can default on your financial obligations through bankruptcy or by crying to uncle sugar.

marinelife's avatar

@HungryGuy They did have to pay it back and most of them have paid it back.

HungryGuy's avatar

@marinelife – Oh? Well, good then :-)

Hypocrisy_Central's avatar

Are we just talking about banks?

Dutchess_III's avatar

@Hypocrisy_Central? I say no. Not just banks. We’re talking about promises, be it to a bank an individual, a credit card company, whomever….

YARNLADY's avatar

Yes, but there is also a fiduciary responsibility on the part of the lender to make sure they can pay it back. The real problem came up when unscrupulous lenders loaned money to people they knew couldn’t pay it back, took their fees, then sold the bad loans to the large corporate institutions. The crooks got their money and left everybody else holding the bag.

The unscrupulous lenders made unrealistic promises to the buyers about re-financing, which they knew was not true.

HungryGuy's avatar

To the best of my knowledge, people are required to pay their debts. It’s a myth that anyone can apply for bankruptcy on a whim and be released from their debts.

I did a little research and discovered that there are several types of bankruptcy in the US, but the most common types that are available to individuals are Chapter 7 and Chapter 11.

The most common type available to individuals is Chapter 11 where the court sets a payment schedule for you to pay back your debts. Chapter 11 does not free you from your debts. You do have to pay back all your debts, just per a schedule that you can afford.

The second most common type available to individuals is Chapter 7 where you are ordered by the court to sell off all your assets (except for a few “exempt” items, such as the clothes on your back) to apply to your debts. The rest of your debts after that are forgiven by the court. However, this form of bankruptcy has always been very difficult to be granted. Furthermore, on 20-April-2005, US President Bush enacted the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 into law, making it even more difficult to be granted this form of bankruptcy.

As for solving the current debt crisis, I guess that depends on whether you’re a moralist or a pragmatist. If you’re a moralist, you’re gonna say that everybody ought to pay their debts; period, end of discussion. If you’re a pragmatist, you’re gonna say that it does the greatest good for the greatest numbers if people are forgiven their debts (at least partially) and not put out on the street; we saw the government bail out big corporations and the wealthy, so why then is it such a sin for the wealthy to extend the same favor to the people?

Which side is right? Well, that’s why we live in a democracy…

Aethelwine's avatar

@HungryGuy I think you mean Chapter 13 for individuals. My husband and I are on a 3 year plan (Chapter 13) at the moment to pay off our debts. Chapter 11 is for businesses.

Dutchess_III's avatar

@YARNLADY It goes both ways. But the person who borrows money he knows he can’t pay back is more to blame than anyone else, imo.

HungryGuy's avatar

@jonsblond – Thanks! I stand corrected (I’m not an expert on US law) :-p

YARNLADY's avatar

@Dutchess_III While I agree with you that anyone who knows they can’t pay it back is to blame, many of these people were tricked and lied to about what they were getting into.

Some were promised that the payments would start out real low, and then when the loan reverted to full payments, they could re-finance at lower interest rate and payment. This is what can happen in a growing economy, not in a real estate bubble. The broker then takes his cut and leaves them holding the bag with zero chance of re-finance.

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