Should Christians File for Bankruptcy?
“I am often asked what the Bible says about Christians filing for bankruptcy, and it is a serious spiritual struggle for many,” says San Diego attorney Carl Starrett, in his Legal Tips and Commentary blog. “Christians often struggle with feelings of guilt that creditors will not be repaid,” he says. “Others feel that they have failed God by not being good stewards with their money. Others believe that the Bible condemns bankruptcy.”
According to a Bankruptcy Statistics report last year, bankruptcy filings rose to 6,000 a day in May 2009 when the United States economy turned. An USA Today report from the same week said, “Filings are surging back in part because of rising job losses. The unemployment rate could hit ten percent this year. And tighter credit, dwindling 401(k) accounts, smaller paychecks, and less savings have left unemployed workers—and those who are working but struggling—with fewer financial resources to keep creditors at bay.”
While some bankruptcies may be the result of sudden unexpected financial setbacks, Christian finance writer Jim Paris says statistics really don’t support this. “Most bankruptcies are the result of individuals spending more than they earn over a long period of time,” he says. “Bankruptcy will provide you the chance to start over again, but you will likely end up in the exact same circumstances unless you change your financial habits.”
Like the population as a whole, many Christians are struggling with the decision to file for bankruptcy. Christians who don’t take their decision lightly. Christians who have tried everything possible to eliminate their debt until bankruptcy seems, as a last resort, their only option.
But, is bankruptcy scriptural? Matthew Tozer and Ben Lofstedt attempt to answer this question in an article mentioned on the Starrett blog. They begin by defining the term bankruptcy, then examine what the Bible says.
America’s founding fathers recognized the importance of bankruptcy, say Tozer and Lofstedt. According to the U.S. Constitution, the government has the right to make bankruptcy laws. Modern bankruptcy laws, instituted by the federal government, provide relief for overburdened debtors—an opportunity for debtors to get a “fresh start.”
In most cases, bankruptcy will discharge the debtor’s obligation to repay some or all of their debts. Therefore, bankruptcy considers the forgiveness of debt. Likewise, say the authors, the Bible contains debt forgiveness laws.
In a Chapter 7 bankruptcy, under federal law, a debtor may only receive a discharge of debts once every eight years. Under biblical law, the release of debts came at the end of seven years. Eugene Peterson’s The Message Bible translates Deuteronomy 15:1-2:
“At the stop of every seventh year, cancel all debts. This is the procedure: Everyone who has lent money to a neighbor writes it off. You must not press your neighbor or his brother for payment: All-Debts-Are-Canceled—God says so. You may collect payment from foreigners, but whatever you have lent to your fellow Israelite you must write off.”
In Proverbs 22:7, the Bible refers to debt as bondage: “…the borrower is servant to the lender.” In other words, the debtor is slave to the creditor. Tozer and Lofstedt note what happens at the end of the sixth year, according to the Bible. The Message translation says:
“If a Hebrew man or Hebrew woman was sold to you and has served you for six years, in the seventh year you must set him or her free, released into a free life. And when you set them free don’t send them off empty-handed. Provide them with some animals, plenty of bread and wine and oil. Load them with provisions from all the blessings with which God, your God, has blessed you.” The passage ends, “Don’t for a minute forget that you were once slaves in Egypt and God, your God, redeemed you from that slave world.”
Like the biblical provisions cited above, today’s bankruptcy laws allow debtors to keep some exempt property when they file for bankruptcy. “This gives debtors a fresh start and discourages debtors from going into debt-bondage again, after the bankruptcy is over, in order to survive,” say Tozer and Lofstedt.
They compare the law of justice with the law of mercy. Economically speaking, if you agree to borrow money and repay the debt, you must pay back this debt. That’s the law of justice. On the other hand, if you cannot pay back the debt, you may, through bankruptcy, obtain forgiveness for your obligation. That’s the law of mercy.
As with any act of mercy, someone must carry the burden—like Jesus carried our burdens when he died for our sins. With bankruptcy, the creditors and consumers bear the cost of unpaid debt. But the Bible says God will bless the lenders for their acts of forgiveness and mercy (Deuteronomy 15:5,10, 18).
With biblical principles, there is balance. And there is a balance in bankruptcy, too. Certain debts cannot be discharged through bankruptcy, such as child support, alimony, and debts involving fraud, drunken driving, and deliberate wrongdoing. Bankruptcy will usually not forgive student loans, taxes, and secured loans, either.
If you can repay your debts, you must do so. “We must accept the reality though, that there are cases where the amount of debt is beyond what a person may be able to repay over a reasonable period of time,” Paris says.
If you do not have the ability to repay your debts, bankruptcy is legally an option. Tozer, Lofstedt, Starrett, and Paris think it’s an option that is also biblically and spiritually available to Christians.
But your decision to file for bankruptcy should be made only after much prayer and consideration. Seek God’s guidance as well as godly financial counsel. You may find that bankruptcy, based on the law of mercy with biblical origins—if necessary—can give you a fresh start and a brighter financial future.
Written by AnnetteSmith