As the news headlines blare stories of the corporate and personal bankruptcies of those who have run into hard times or simply mismanaged their money, many pundits and ordinary Americans are calling for tougher bankruptcy laws. Many who consider themselves financially responsible resent having to bailout those who are not. Many people see bankruptcy as a cheat of sorts. Bankruptcy is not a cheat; but a law that allows debt forgiveness. The truth is that bankruptcy is one of the reasons that our nation has experienced the type of fast-paced growth and innovation that countries like Laos can only dream of. Currently individuals and businesses can take on debt and take risks and if something goes wrong they can get a fresh start with bankruptcy.
Without bankruptcy, the most innovative and adventurous of us would be extremely cautious about taking on debt to start a business, invent a product or even purchase a home or car. It is because of bankruptcy that our business environment is more dynamic that Europe and Asia. It is because of bankruptcy that our working-class and middle-class can get a fresh start after a job loss or illness put them into debt. There are countries that have no or very little bankruptcy protection for their citizens. In those countries without bankruptcy, debts not only stay with your for life, they are often passed down to your children. Bankruptcy is a progressive set of laws that prevents the debtor from being the slave. Let’s not forget that as we witness our neighbors struggling financially and declaring bankruptcy.