View Poll Results: Is there a moral obligation to repay money you borrow?

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  • If you borrow money, you are morally obligated to repay it.

    110 34.48%
  • I feel no moral obligation to repay loans I've taken out

    209 65.52%
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Thread: Are you morally obligated to repay a loan that you take?[W:461]

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by justabubba View Post
    for the purposes of this discussion, your discussion, whether paying a debt is a moral obligation, both are instances of debt but not surprised you are unable to recognize that very obvious fact
    You're conflating issues in a most ignorant fashion, there, Bubba. But if you want to pretend that, for the sake of this discussion, cell phone contracts and mortgage contracts are the same because there is money involved and there is a contract, so be it. I'll humor your ignorance along and we'll just go with that.

    There is a cancellation option in your cell phone contract. If you cancel early and pay the option, you did nothing immoral. In a mortgage contract there is also an early cancellation option where you just pay the bank what you owe them and exit the contract without doing anything immoral. If you deadbeat either one of them, breaking the contract and failing to pay what you owe, it is IMMORAL rather than moral.

    Pretending that you think defaulting on a loan is just taking advantage of a contract option is about as intellectually dishonest a pretense as there can be.
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    Sure there is - the loan document says, "These are our rights and borrower's obligations in the event of default" and one of those is foreclose on the house, sell it and keep the proceeds, another is to sue for the balance, etc. The lender agreed to those terms.
    That isn't an option for you to decide to stop paying. It is an explanation of all the bad things that will happen to you for acting immorally and defaulting on your loan. I can't imagine how any honest person would assert those two things are the same for all intents and purposes. It's just not an honest position.
    You can't reason anyone out of a position they didn't reason themselves into in the first place.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    That isn't an option for you to decide to stop paying. It is an explanation of all the bad things that will happen to you for acting immorally and defaulting on your loan. I can't imagine how any honest person would assert those two things are the same for all intents and purposes. It's just not an honest position.
    OK, is it moral to form as an LLC and borrow for the spec house through the LLC so you as owner can avoid repaying that loan? I've done returns for dozens of real estate investors and they have often have separate entities for each property, and if that property gets into financial trouble, they don't volunteer the assets of the other companies to pay off that debt - they have separate entities so the losses in one will not threaten all the others. It's the point of it all. Is that immoral?

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    Re: Are you morally obligated to repay a loan that you take?

    Quote Originally Posted by spangledbanner View Post
    Yes. But if it is beyond the person to pay then grace or forgiveness is needed. For example Greek debt is unrealistic. It can't be paid. It must be forgiven. At least most of it. Corporations go bankrupt all the time. So do individuals. Sometimes a nation defaults.
    If it's unrealistic (the Greek debt) then it shouldnt have been loaned. I think that was more a political move personally.

    However regarding grace or forgiveness, those are personal virtues and not to be expected from business or corporate entities. I have never heard of any contract that says, "and if the contractee cannot fulfill the terms of this contract in full faith because of hardship, then the contract is null and void."**

    Yes, a business *can forgive a debt* they may have a policy for that, but that debt will be passed on to others who do business/have loans with that company.

    **There is bankruptcy but that is thru the legal system, not the business. The business may still get some or all that's owed it after that process.
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    OK, is it moral to form as an LLC and borrow for the spec house through the LLC so you as owner can avoid repaying that loan?
    Nope.

    I've done returns for dozens of real estate investors and they have often have separate entities for each property, and if that property gets into financial trouble, they don't volunteer the assets of the other companies to pay off that debt - they have separate entities so the losses in one will not threaten all the others. It's the point of it all. Is that immoral?
    It depends. If the purpose is actually to default on any property where the mortgage is higher than the property value without affecting other properties, then yes, it is immoral. I'm not sure that would work out so well, though. The type of behavior you are talking about would likely allow the mortgage company to go after the owner of the LLC and any assets he may have because what you are talking about is a sort of flow-through that would likely cause the court to find that the corporate veil can be pierced since the owner is, for all intents and purposes, the LLC.

    But the bottom line is that if you intend to stick someone else with losses that you incurred just because you think you've got a legal way to do it then, from an ethical perspective, you are more corrupt than all the businesses I've worked for but one. Honorable people don't do that. Neither do honorable businesses.
    Last edited by Papa bull; 01-28-15 at 12:49 PM.
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    Right but if I as an individual have moral responsibilities to fulfill my end of a loan contract, I can't avoid that by incorporating and having the "business" borrow money. The law respects that an LLC or corp is a separate entity from the owners for purposes of legal liability for loans and losses, but I can't imagine morality will follow the letter of the law and mandate repayment if an individual or sole proprietor but NOT if an LLC/LLP/Corporation, etc.

    And that's my point - if you accept that 'businesses' are amoral and you appear to, then I see no reason why an individual on the opposite side of a contract with an amoral, profit maximizing 'business' has a uniquely moral duty with regard to that contract that the 'business' does not share. I think their "moral" obligations are identical - maximize profits.

    One other point - conflating "cheating, fraud, and non-payment" is illegitimate. Remedies for default are outlined in the loan document that both parties agreed to, and there is no fraud for a party to default and accept those terms - lose the house, ruin credit, generally allow the lender to sue for any shortfall if the collateral is insufficient to pay the loan, perhaps a bankruptcy filing, etc.
    I have spelled out how defaulting harms others doing business with the company and/or in that pool of users.

    What you are talking about are the legitimate penalties a business may use to get its $$. Part of the business contract, amoral. (And you didnt assign any morality there, I'm just point it out). However that is not always the case and if there is nothing left to take, then again....the business model compensates by spreading out that loss among others.
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    Nope.
    OK, but the lender accepts that the assets of the LLC is sufficient collateral. Doesn't the lender have an obligation?

    It depends. If the purpose is actually to default on any property where the mortgage is higher than the property value without affecting other properties, then yes, it is immoral.
    Of course the purpose of separate LLCs is not to default - they buy property, take out a loan, to make money. But a primary reason to form as an LLC or corporation and not as a GP or sole proprietorship is to protect the owner's assets and to protect the owner's other business interests if and when the venture fails. LLCs exist so owners can act as general partners (run the business) but insulate themselves from liabilities of the business, and all 50 states authorize LLCs and they've ballooned in number from the first day they were approved in that state. Those LLC members are not immoral - they're making rational decisions to protect their personal assets from debts/losses and so converted their GPs to LLCs.

    I'm not sure that would work out so well, though. The type of behavior you are talking about would likely allow the mortgage company to go after the owner of the LLC and any assets he may have because what you are talking about is a sort of flow-through that would likely cause the court to find that the corporate veil can be pierced since the owner is, for all intents and purposes, the LLC.
    It might, but that's not a moral choice, that's a function of the law. If it's immoral to default on a debt, the owner must on his own disregard the liability protection and volunteer to pay debts he's legally allowed to avoid. If that was the case, he'd hold the property personally and avoid the headache of forming an LLC and filing separate returns, etc.

    But the bottom line is that if you intend to stick someone else with losses that you incurred just because you think you've got a legal way to do it then, from an ethical perspective, you are more corrupt than all the businesses I've worked for but one. Honorable people don't do that. Neither do honorable businesses.
    I'm not corrupt and have made many choices in my life that cost me money to maintain my integrity. I just don't agree that the world is black and white, or that defaulting on loans is presumed "immoral," any more than I believe breaking any other contract is immoral. I KNOW businesses are amoral creatures and we expect that - if they can save money by laying off 5,000 workers and moving a plant to China, they'll do it because their purpose is to maximize profits, etc. And as a general rule, I don't demand that individuals live to a higher moral standard than the businesses they enter into agreements with.
    Last edited by JasperL; 01-28-15 at 01:22 PM.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by JasperL View Post
    OK, but the lender accepts that the assets of the LLC is sufficient collateral. Doesn't the lender have an obligation?



    Of course the purpose of separate LLCs is not to default - they buy property, take out a loan, to make money. But a primary reason to form as an LLC or corporation and not as a GP or sole proprietorship is to protect the owner's assets and to protect the owner's other business interests if and when the venture fails. LLCs exist so owners can act as general partners (run the business) but insulate themselves from liabilities of the business, and all 50 states authorize LLCs and they've ballooned in number from the first day they were approved in that state. Those LLC members are not immoral - they're making rational decisions to protect their personal assets from debts/losses and so converted their GPs to LLCs.



    It might, but that's not a moral choice, that's a function of the law. If it's immoral to default on a debt, the owner must on his own disregard the liability protection and volunteer to pay debts he's legally allowed to avoid. If that was the case, he'd hold the property personally and avoid the headache of forming an LLC and filing separate returns, etc.



    I'm not corrupt and have made many choices in my life that cost me money to maintain my integrity. I just don't agree that the world is black and white, or that defaulting on loans is presumed "immoral," any more than I believe breaking any other contract is immoral. I KNOW businesses are amoral creatures and we expect that - if they can save money by laying off 5,000 workers and moving a plant to China, they'll do it because their purpose is to maximize profits, etc. And as a general rule, I don't demand that individuals live to a higher moral standard than the businesses they enter into agreements with.
    I expect everyone to do what is right and honest. I'm frequently disappointed, but I expect people to do what's right. I expect businesses to do what is right, too. And not one person who utilized a "strategic default" to duck an investment loss when they bought property is living up to the moral standard set by the bank that followed through on their end of the deal and cut the check. In these situations, there's only ONE party that is doing the immoral/unethical thing and it's not the bank. The bank lived up to it's obligation. You, the borrower, need to live up to yours.
    You can't reason anyone out of a position they didn't reason themselves into in the first place.

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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    I expect everyone to do what is right and honest. I'm frequently disappointed, but I expect people to do what's right. I expect businesses to do what is right, too. And not one person who utilized a "strategic default" to duck an investment loss when they bought property is living up to the moral standard set by the bank that followed through on their end of the deal and cut the check. In these situations, there's only ONE party that is doing the immoral/unethical thing and it's not the bank. The bank lived up to it's obligation. You, the borrower, need to live up to yours.
    so, that bank, the one that made a loan so you could be upside down in a home by $30,000, is the more moral party
    doesn't matter that your moral bank sold that potentially upside down loan to an investor to avoid risking the loss it anticipated because it had statisticians and economists on staff to better anticipate the economic downturn than you
    and when you ponied up the additional $30,000 in the belief it was the moral thing to do, you aided an investor with whom you had no dealings and who held your Note without your approval or consideration
    now, share with us what you got for that $30,000 you needlessly gave over to that secondary market investor
    in short, you made a terrible business decision
    could it be that you are trying to find some justification in order to salve that expensively bad business decision
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    Re: Are you morally obligated to repay a loan that you take?[W:461]

    Quote Originally Posted by Papa bull View Post
    I expect everyone to do what is right and honest. I'm frequently disappointed, but I expect people to do what's right. I expect businesses to do what is right, too. And not one person who utilized a "strategic default" to duck an investment loss when they bought property is living up to the moral standard set by the bank that followed through on their end of the deal and cut the check. In these situations, there's only ONE party that is doing the immoral/unethical thing and it's not the bank. The bank lived up to it's obligation. You, the borrower, need to live up to yours.
    Did the bank live up to its obligation? Is it moral to swindle people?
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