Bankruptcy and Credit
Every society must resolve the tension between debtors and creditors, especially if the debtors cannot pay or cannot pay quickly enough. Many of the world's religions have condemned lending money for interest, at least among co-religionists. In traditional societies, money lenders, although necessary for ordinary commerce, were often viewed as morally suspect. The development of a robust capitalism was based upon raising capital by paying interest or dividends, and so it has been important for capitalist societies to develop institutions and mechanisms for handling debt and credit.
The inherent tension between creditors and debtors turns upon the creditor's claim to justice as the property owner and the debtor's interest in fairness in the terms of repayment. To be sure, lenders sometimes used their position to create social control mechanisms such that debtors often could never work their way out of debt. Such arrangements as sharecropping and the use of the company store often tied laborers to employers through the bonds of debt. With some exceptions, states and legal regimes upheld property rights against the claims of the debtors.
Through the years, societies have sanctioned creditors' use of slavery, debt-prison, transportation to debtors' colonies, debt-peonage, seizure of assets or garnishment of wages to control debtors.
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