People started borrowing money on credit cards or any source they could find. Then take the money, buy bitcoins and then file bankruptcy?
Prison. That would be fraud.
What if the bitcoins got deleted/hacked? Also wouldn't they have to prove fraud? I'm assuming it would be difficult considering people usually just blow the money in their credit cards on useless crap anyways. Also most of these credit cards/payday loans etc are no collateral loans. So do you think it would be very likely that the banks would chase you around on fraud charges? Seems like they would just take the loss and walk instead of waste time. Likewise, how about if you borrowed the money from some p2p lending site like prosper.com? In that case, you borrowed small amounts of money from potentially hundreds of people. Seems unlikely that they would chase you down in that situation.
Another issue I could think of is perhaps during divorce trials where xyz person sold a bunch of assets and put all the money into bitcoins. Seems like it would be very difficult if not next to impossible to recover the bitcoins. Thats assuming the person did a good job of hiding the bitcoin keys.
i suspect you ask that assuming those bitcoins would not be declared as assets on the bankruptcy filing?
Yes of course, you blew all the money on bitcoins.
i guess there would be a trail into the exchange, wonder how that'd play out
Yea, would show up as. Credit card funds ---)bank account---)dwolla---)mt gox----)bitcoins
Then after that pretty much not much trace of where the bitcoins went, especially if you were sending the bitcoins to other persons.
If questioned during the proceedings the person would probably play it out as they lost the bitcoins, gambled them away or lost them in some other fashion.