Bankruptcy: Wrong for You, OK for American Airlines

It's a double standard that needs to go
By Kevin Spak,  Newser Staff
Posted Dec 12, 2011 1:06 PM CST
Bankruptcy: Wrong for You, OK for American Airlines
In this June 29, 2011 file photo, an American Airlines aircraft at Dallas-Fort Worth International Airport, in Grapevine, Texas.   (AP Photo/Tony Gutierrez, File)

(Newser) – When American Airlines declared bankruptcy even though it could afford to pay its debts, pundits largely applauded this smart business move. Many homeowners face the same predicament, observes James Surowiecki in the New Yorker: "They can still pay their debts, but doing so is like setting a pile of money on fire every month," because home values have plummeted. But when they default, they're not praised for their business sense. "There's a real stigma to defaulting," with polls showing 81% consider it immoral.

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That's in part because the banking industry launched a concerted campaign to stigmatize it. The Mortgage Bankers Association, for example, once complained that defaulters were setting a bad example for "their family and their kids"—even as it short-sold its headquarters, unloading it for $34 million less than the value of the mortgage. "The double standard here is obvious and offensive," Surowiecki writes, calling for a "De-Occupy Your Home" movement. "The banks have been relying on homeowners to do the right thing. It might be time for homeowners to do the smart thing instead." Click for the full column. (Read more bankruptcy stories.)

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