Is High End Bankruptcy a Moral Failing?

An interesting discussion came up amongst my MBA classmates about a colleague who declared personal bankruptcy.  It’s certainly not a topic that would be much mentioned in Stanford GSB literature, but it’s a reminder that there is absolutely no failsafe against hard times, including a Stanford degree.  The underlying driver of the bankruptcy was substantial personal leverage utilized to support a start-up which never gained enough momentum to become a self-sustaining company.

While there was general sympathy for the business failing, there was considerable disagreement over the ethics of the bankruptcy.  In particular, this person lived large, and had Facebook and Instagram profiles which could inspire jealousy even amongst the well-heeled Stanford crowd.  All sorts of photos of trips to exotic locations, five-star resorts, Michelin-rated restaurants, high-end cars,etc.  I even ran into him at a golf event that UBS was sponsoring.

My own view was fairly generous to the person.  There was no reason to believe he ever intended to pull a fast one on his list of creditors, and he firmly believed that he was living a lifestyle which was appropriate to his position and sustainable.  It’s true that maybe he flaunted his travels and toys a bit more than he should have, but that doesn’t mean his intentions were ever devious.  I think he just go ahead of himself.

In general, while bankruptcy can certainly be taken advantage of in an underhanded way, I think most people find themselves in that situation genuinely intended to be financially upstanding and responsible.

— Tim Shields, UBS

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