Do you have a moral obligation to repay your debts?

Megan McArdle asks:

Should defaulters feel bad?  I’ve been thinking about this a lot lately.  A number of people have made the argument to me that the credit system is morally neutral, at lest from the point of view of the debtor.  The banks knew when they lent to you that there was a risk of default, and if you do, you pay the penalties.  Why feel guilty?  They don’t, for selling you the rope with which you hung yourself.

To some extent, I actually agree with this.  Though I’ll also note that if you default, the worst thing that generally happens to you is that it’s hard to get credit.  Yet, the way the credit card companies allegedly bring on your default is by giving you credit.  I’m not sure that the argument that credit card companies should deny you credit, because otherwise you won’t be able to get any credit, really works too well.

But leaving that aside, why should you feel morally obligated to repay, at great personal cost, a company which feels no obligation to you?  No particular reason, maybe, except that the belief in a moral obligation to repay one’s debts may be the only reason we can have both credit, and relatively light legal sanctions for overusing credit.  If people really acted as if the choice to default were morally neutral, we’d either lose most of our credit system, or the legal rules would have to be much more punitive. 

Look, I’m not going to spend a lot of time blaming someone who, through extraordinary bad luck, gets in a bad situation and finds themselves obligated to seek legal discharge.  That said, I can’t count the number of times I’ve heard callers call into the Dave Ramsey Show with a story about how they bought some sort of lovely luxury with the full intention to declare bankruptcy directly thereafter.  Morally reprehensable, yet supported by our system. 

Personally, even if the debts are excused in the legal sense, if I legitimately spent the money, I think that one ought to do what one can to pay it back, even if it takes a long time.  Of course, I’m the sort of person who is constantly hunting down the waiter to tell them that they forgot to charge me for that last drink, and making sure that cashiers didn’t give me too much change.  If I were in an emergency situation, like a natural disaster, and found myself needing to “loot” from a store, I would probably send them a check a few weeks later to make sure we were square.  So, that might just be me.

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