A client asked me this the other day. It didn't occur to me until the client kept repeating the question that bankruptcy is something both scary and almost unbelieavable. Why would anyone EVER let someone borrow money if there is a possibility that the debt may NEVER be paid back under the law? The answer is simple--Capitalism is all about risk. The government encourages banks to lend money and allow them to make a profit by betting on their customer's future. It also encourages people to take risk, big risks, to better our society. And when one fails, the government provides a mean to hit the 'reset' button and start over. Indeed, we almost lost GM if it wasn't for this policy.
When it seems like life is impossible to go on and debt is keeping life from progressing, bankruptcy may be the relief valve that one needs. Bankruptcy law allows a judge to order a discharge of any debt. A discharge is an injunction, or restraining order, against creditors. It is an order to cease ALL collection action against the debtor and it last forever. Some debts are not dischargeable, such as child support, certain tax debt, and government fines, but a majority of all debts are indeed dischargeable. And just like that, debts simply just go away.