Debtor’s prisons are gone — for now, anyway.

However, lenders have inculcated into people the idea that they have some sort of moral obligation to pay their debts. While I think there is an obligation — otherwise society wouldn’t function — the “moral” part of it is senseless.

If you can’t afford to pay your mortgage any longer, the lender feels no moral qualms at all about spilling you and your family out onto the street. It’s just a business decision for them. It will make them more money to have you homeless than it will for them to allow you to stay.

So what am I saying?

I’m saying that paying your debts should be looked at as a business decision, just like the lenders view it. After all, if it’s not a moral quandary for them to kick your ass out on the street, or to take your car — the only way you have to get to work — then why should it be some kind of moral decision for you?

It shouldn’t be, of course.

Which is why if it makes more sense for you to walk away from your home than to stay, do it. After all, not a single lender would think twice if you had to live in a cardboard box.

Any loan and its repayment should be a business decision — nothing else. As long as you understand what the consequences are of your actions, treating loans that way is the only thing that makes sense in our current society.

Also, huge companies strategically default on loans all the time. Happens every week, even during boom times. So while they are waving the moral stick at you, they are doing the same damn thing in the business world.

2 Comments »