Megan McArdle at The Atlantic is currently working on a long feature piece about consumer borrowing. But since the article won’t be out until early 2010, she has given us a taste by sharing an interesting observation about people who walk away from secured debt.

A secured loan, if you’re unfamiliar, is one backed by collateral, such as your car or your house. If you don’t pay your bills, someone comes and takes your collateral. And right now, more and more people are choosing to forfeit their possessions rather than sinking more money into their depreciating assets.

In McArdle’s words, here’s why that’s a bad thing:

If you have sizeable assets or stong income, the bank isn’t going to let you do a short sale just because your house has lost value and you don’t want to waste any more money on it. The second mortgage holder you’ve decided to stop paying will probably block the sale. If you let the house go into foreclosure while you still have assets, unless you live in a non-recourse state, the lender will come after you. As will the lender that repo’d your car. The borrowers always seem sort of shocked to find out that yes, lenders have legal recourse if you decide to stop paying them.

I wonder if they haven’t gotten this notion from all the articles about jingle mail and desperate families trying to short-sell. What seems to have sunk in is that you can stiff the bank. Yes, you can, but often only if it’s not worth suing you.

She wonders whether this unhealthy relationship with credit is just “part of the American soul” — I’d like to hope it isn’t. What does it say about our society when refusing to pay our debts on agreed-upon terms isn’t an ethical issue?

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