Debt Discharge, Mercy, and Social Justice in Bankruptcy Law
This paper examines the ethical and social dimensions of personal bankruptcy and debt discharge under the federal Bankruptcy Act. Drawing on Zywicki (2000) and Miles (1995), it contrasts two competing frameworks: one that views debt repayment as essential to social trust, reciprocity, and the market economy, and another that prioritizes mercy and distributive justice toward those unable to repay. The paper argues that bankruptcy protection is consistent with principles of social justice, noting that creditors knowingly assume default risk and that historically punitive measures against debtors caused widespread suffering. Ultimately, it presents forgiveness as an underappreciated but vital element of a just economic order.
- Introduction: Bankruptcy, Reciprocity, and Social Trust: Zywicki's argument that bankruptcy immunity erodes social trust
- The Case for Mercy and Distributive Justice: Miles's counter-view prioritizing mercy over reciprocity
- Evaluating the Bankruptcy Act Through a Social Justice Lens: Bankruptcy Act defended as fair under distributive justice
- Forgiveness as an Element of Economic Justice: Historical context linking bankruptcy reform to debtor's prison
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What makes this paper effective
- It clearly frames a two-sided debate — Zywicki's reciprocity argument versus Miles's distributive justice framework — before staking a position, giving the analysis intellectual fairness.
- Each claim is grounded in cited scholarship, lending credibility to what could otherwise be purely opinion-based ethical reasoning.
- The paper connects abstract concepts (mercy, reciprocity, social trust) to concrete legal and economic realities such as credit markets, mortgage-backed securities, and debtor's prisons.
Key academic technique demonstrated
The paper uses compare-and-contrast synthesis across two sources to build an argument rather than summarizing each source in isolation. By staging Zywicki and Miles as intellectual opponents, the writer demonstrates how competing scholarly frameworks can be used to evaluate a policy question — a core skill in social science and law writing.
Structure breakdown
The essay opens by presenting Zywicki's critique of bankruptcy immunity and its threat to social trust. It then introduces Miles's counterpoint centered on mercy and distributive justice. The third section applies the Miles framework directly to the Bankruptcy Act, noting that creditors knowingly assume default risk. The final section historicizes the argument, connecting modern bankruptcy law to the reform of debtors' prisons and emphasizing forgiveness as a social good.
Introduction: Bankruptcy, Reciprocity, and Social Trust
According to Zywicki (2000), rampant personal bankruptcy frays the social moral order and undermines reciprocity. Throughout history, a debtor who failed to repay a debt was generally regarded as a fraud or a thief; debtors' prisons existed for that reason, and it was unthinkable that a loan should not be repaid. However, today, personal bankruptcy laws like the federal Bankruptcy Act protect borrowers by providing immunity from creditors. The borrower who defaults will see his credit rating decline to the point where it is nearly impossible for him to obtain another loan, but he is not held responsible for paying back his creditors.
There is a social cost to this, as Zywicki (2000) points out: bankruptcy laws that provide defaulters with immunity undermine the market economy, democracy, and the healthy institutions that rely on reciprocity. In short, personal bankruptcy and immunity from prosecution erode social trust. The ability of a person or institution to repay debts, as agreed upon between the borrower and the lender, "has a salutary effect on social relations" (Zywicki, 2000, p. 8). Without that salutary effect, democracy itself is threatened, according to Zywicki (2000).
The Case for Mercy and Distributive Justice
Yet, as Miles (1995) argues, the real virtue that holds society together is mercy — not reciprocity. Mercy shown toward individuals who fail to repay their debts is important to social justice. When the less fortunate are visited by hard times, it is a quality of mercy to show leniency toward them, and this attitude should be reflected in the law: "If it is necessary for the common good of all to require contribution and sacrifice from the more fortunate to the less fortunate, then the laws must so provide" (Miles, 1995, p. 1034).
Thus, while Zywicki (2000) argues that a failure to repay debts undermines trust in society, Miles (1995) contends that such a failure should not be viewed as a travesty but rather as an opportunity for those who have to show mercy toward those who have not. This is the essence of what Miles (1995) calls distributive justice — the heart of social justice.
Evaluating the Bankruptcy Act Through a Social Justice Lens
From a social justice perspective, it could thus be said that the federal Bankruptcy Act is fair and appropriate. Rather than holding those accountable who fail to repay debts, it offers such individuals a way to wipe the slate clean. Importantly, this possibility is known ahead of time by all creditors: there is a risk that a borrower may default, and the creditor assumes that risk when providing the loan.
Today, creditors also have the opportunity to offload that risk by selling debts on the open market to investors seeking to collect a yield. Those investors likewise accept the risk involved. Whether one is buying mortgage-backed securities or Treasuries, the same risk applies: a default may occur. To suggest that bankruptcy protection should be abolished or reformed, as Zywicki (2000) contends, is to lose sight of what Miles (1995) sees as an important element of advancing social justice in society: the need for forgiveness.
References
Miles, V. V. (1995). Assessing modern bankruptcy law: An example of justice. Santa Clara L. Rev., 36, 1025.
Zywicki, T. J. (2000). Bankruptcy law as social legislation. Tex. Rev. L. & Pol., 5, 393.
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