jail is pretty bad, but it's not infinitely bad. that is, there almost certainly exists a sum $X for which you would be willing to go to jail for Y duration of time.

if you're struggling to stay afloat and have no credit/assets, a short time in jail is way worse than bankruptcy. on the other hand, if you've worked as a SWE for a few years, loosing all your money and having terrible credit for years is pretty awful. you're broke, so you can't buy anything outright, and your losses are compounded by the fact that you pay much more interest on things you buy on credit (if you can even get financing at all). it's not hard to see that this could be worse than a short time in jail. it all depends on the length of the sentence and your total losses from bankruptcy.

You do realize that there is life without good credit report? You don’t need to borrow money from somebody else/bank to live good life. Most of the world lives without an obsession with credit reports and borrowing.

yes but (at least in the US), your credit score affects stuff other than borrowing. often landlords will perform a credit check before approving your application; even employers will sometimes check an applicant's credit.

also keep in mind we are talking bad credit and all your assets seized by creditors. i'm not saying a bad credit score is literal hell on earth, but if you have no money and no credit you are gonna have a really bad time for a while.

Most of the world, yes. Silicon Valley? Not so much.