Question: What is the proper purpose of bankruptcy laws? When should a person renegotiate his debt with lenders, if ever? Should a person be able to wipe his debt clean by going into bankruptcy? In your 10 July 2011 webcast discussion of strategic default on mortgages, you suggested that a person shouldn't be able to do that, but shouldn't lenders be responsible for who they lend money to?
Question: Is it moral to strategically default on your mortgage? Suppose that you could continue to pay your mortgage, but you're underwater: you owe more than the house is worth. You realize that you'd save tens of thousands of dollars by defaulting. Would it be morally wrong to default, assuming that you don't engage in any fraud or other dishonesty in doing so? Would it make a difference if you do that in today's highly regulated market versus in a fully free market?