I thought one of the biggest advantage of US financial system is for people to take risks with their business but can fail without a huge hit on their future, i.e. bankruptcy.
Without this attitude, you'll have people that is a lot more hesitant to start a business.
Yeah, there's been some research on this, showing a positive relationship between how "forgiving" a country's personal bankruptcy laws are and the level of entrepreneurship in that country: http://aler.oxfordjournals.org/cgi/content/abstract/ahn008v1
Taking undue risks is not a good thing. The greatest thing about a makret economy is that there is both profit and loss. Loss is to keep you from producing things no-one really wants, and is important. Without any risk, sure, people could do creative things they wouldn't have odne otherwise, sure. But you would soon see that the value produced in a society like that would be very small compared to a society where you have to turn a profit.
What are they going to do, throw you in debtors' prison? Even in that case, all it really means is that you will have to work more to pay it (and the extra interest and penalties) off later.
There's no shame in defaulting on your debt because you tried to create a new economically productive company and failed. That's what bankruptcy is best used for. It's not like leasing a BMW.
Without this attitude, you'll have people that is a lot more hesitant to start a business.