Should We Care If People Don't Pay Their Debts?

Megan McArdle

Photo: David Shankbone via Wikimedia Commons

There has been a meme going around for a while that you don’t really have a moral obligation to pay your mortgage, because the contract contains embedded options for the lender: you can pay them back, or they can take the house.  I’ve long thought that this was rather silly.  Go look at your mortgage documents.  You will notice that the contract does not specify any option for you to give them the house in lieu of payment.  The note you signed includes a promise to pay, period.  It also specifies what will happen in the case of breach, but you have specifically promised to avoid breach at all costs.  

Maybe you think there is no moral obligation to keep your promises.  Try it in the context of your personal life:  it’s OK for my boss to stiff me out of that raise they promised, because I can always quit.  It’s OK for my wife to cheat on me, because I can always get a divorce.  It’s OK for my roommate to neglect to pay her half of the rent on the first of the month, as long as she’s willing to move out.  It’s perfectly fine for my son to default on that car I cosigned, because the lender has the option to sue me for the balance . . . hey, wait a minute!Read the rest of this article at The Atlantic.

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