Bankruptcy is such an alien concept. Adults took out consensual loans from another adult and now they get to just say oops "take backsies"?

It's one thing if you're in a crazy desperate situation and someone takes advantage of you, I could get that. But if you're not desperate and you took money from someone else and can't pay it back? Theft.

The rest is just how we manage to keep that low on an aggregate level in our society that takes care of our own - which we want to do.

The goal of having laws is as much about being fair as it is about having a society that can function. Aka "the target amount of fraud is not zero".

Sometimes it's better for both parties to cut their losses and move on to do better things.

Looking at this from the other angle: if value can be created out of nothing it can also disappear into nothing when investment fails.

Well the alternative is people do rational things like self emolate, self defenestrate, suicide, and familicide. During the ‘08 financial crisis I was reading horror stories of Spanish debtors topping themselves because financial fuckups in NYC, London, and Madrid caused a problem other people had to pay for.

The idea is that its better for society to hit the reset button, pay creditors what they can be paid out of liquidation, and potentially have a productive member of society instead of somebody with absolutely nothing left to lose and maybe some grudges.

It's not like bankruptcy is painless.