It's not clear he's a debtor in default. He's a debtor in default if it's equitable to enforce the contract as agreed. But because the contract was based on a common mistake -- that Patrick's loan portfolio did not have significant Pirate exposure -- it's inequitable to enforce the contract as agreed.

Say you and I both believe that you have part ownership a particular car. I agree to pay you $5,000 and you agree to transfer to me your ownership interest in the car. If it turns out that you don't own the car at all, it's inequitable to insist that I still pay you the $5,000 in exchange for your zero ownership interest in the car. I wouldn't be a "scammer" because I broke the agreement, even if it technically appeared to say that all you had to do was transfer to me whatever interest you had, even if that was none at all.

Here there was a common mistake underlying the contract. It's inequitable to enforce the contract as agreed.

By the way, I doubt there are any courts that would enforce a contract of this sort. The usurious interest rates pretty much assure that the contract can only be kept by fraud or coercion and virtually assures this kind of outcome. Blame for that goes equally to both sides, IMO. Anyone who is legitimate and likely to pay back won't borrow at such high interest rates. The only people willing to pay such ridiculous rates are people who don't expect to have to pay back out of their own money.

Both sides deserve equal blame for this outcome, and I see no logic to applying a scammer tag to a transaction where both sides are at equally at fault.

I'd be open to an argument that Patrick is imposing an unfair portion of the default costs on his lenders. They should be shared.