I am quite rabid as far as libertarians go, but even I acknowledge the necessity of bankruptcy protection.
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.
Without it, lenders can lend to anyone regardless of whether it's likely to be paid back, or even whether or not it's possible for them to pay it back. Then those lenders turn around, and demand that all of society pays for debt enforcement through the court system (or in extreme scenarios, through punishment).
Lenders have a responsibility to only extend credit in narrow circumstances, or they need to lose protection for it. The easiest way to do that is with bankruptcy. Borrowers are still discouraged from using it (it's limited to once every 7 years, and punishes besides), so there's little moral hazard there.
Lenders that are businessmen rather than scammers are more than capable of the diligence necessary to avoid bad loans (and the few that are inevitable are a cost of doing business). Lazy, incompetent, or unethical lenders deserve the losses incurred from those practices.
I don't think any of this is a mark against capitalism.