Dear Roger,
What does Scripture say about Christians and Bankruptcy?
Cheryl
Dear Cheryl,
I hope you are just curious and not personally facing the specter of bankruptcy. If you are, let me say from the outset that I grieve for you. Financial difficulties can be merciless. I am glad you asked this question. Many are now facing the crisis of their lives while enduring this present economic shaking.
On the surface, the Bible answer seems simple: “The wicked borrow and do not repay but the righteous give generously (Psalm 37:21). So, bankruptcy is wrong and we must repay our debts at any price to us personally. However, we know that how we handle money is never simple. The Bible has much more to say about bankruptcy.
For example, interest is not to exceed one percent. Nehemiah said to the returning Israelites, “I also, with my brethren and my servants, am lending them money and grain. Please, let us stop this usury! Restore now to them, even this day, their lands, their vineyards, their olive groves, and their houses, also a hundredth of the money and the grain, the new wine and the oil, that you have charged them” (Nehemiah 5:10,11).
The Talmud quotes an ancient rabbi as saying, “It is better to sell your daughter into slavery than to borrow money at interest.” Personally, I would hate to be his daughter! The Lord only knows what this rabbi would say today if confronted with credit cards that charged interest rates of 34.99% and with some “pay day” lenders demanding annual rates in excess of 2,000%.
The word “usury” as used in the Bible corresponds to out present-day word, “interest.” We use “usury” to describe excessive interest. God strongly condemned those who abused the poor through financial exploitation (Exodus 22:25; Leviticus 25:35-37). God declared in Ezekiel 18:13: “If he has exacted usury or taken increase—Shall he then live? He shall not live! If he has done any of these abominations, He shall surely die; His blood shall be upon him.”
Following the lead of our federal government many Americans spend with abandon and end up in miserable financial bondage. The government handles their debt problem by printing more money—and going deeper and deeper into debt. Since we can’t print money (without getting into a whale of a lot of trouble) we turn to bankruptcy laws to protect us from creditors.
“Irresponsible” doesn’t begin to describe those who are head-over-heals in debt for frivolous things—many of whom take out second mortgages to pay for their toys. When we max out multiple credit cards to pay for the latest gadgets we are more than financially irresponsible, we are materialistic worshippers of the god of this world (Luke 13:16).
I’ve noticed a prevailing attitude among those guilty of poor financial management. They try to work out a way to walk away from their indebtedness with minimal repayment while trying to arrange it so that all future earnings are “off limits” to their creditors.
Of course in today’s economy many are facing financial ruin through no fault of their own. Many unexpected circumstances are far beyond their control—like mounting medical bills or the downturn in the housing market that leaves them so “upside down” that they have no choice but to walk away from their mortgage or short sell their house back to the bank.
Is it morally, ethically, or Biblically wrong for Christians to turn to declare bankruptcy?
No.
Let’s look together at some of the Bible teachings.
First, the Bible does not prohibit all borrowing.
Jesus’ testimony regarding borrowing and lending basically settles the validity of the issue. He declared in Matthew 5:42: “Give to the one who asks you, and do not turn away from the one who wants to borrow from you.” Also, in Matthew 25: 27 He disparaged the one talent servant for not entering an agreement with a bank to gain some interest: “So you ought to have deposited my money with the bankers, and at my coming I would have received back my own with interest.”
In Luke 6:34-36 Jesus talked about lending and borrowing in the context of Christian love and self-submission: “And if you lend to those from whom you expect repayment, what credit is that to you? Even ‘sinners lend to sinners, expecting to be repaid in full. But love your enemies, do good to them, and lend to them without expecting to get anything back. Then your reward will be great, and you will be sons of the Most High, because he is kind to the ungrateful and wicked. Be merciful, just as your Father is merciful.
Second, bankruptcy in the Bible is mostly dealt with caring for the poor.
The idea of the middle class needing financial relief is foreign to the Scriptures (There was no middle class in Israel at that time.). Lending was usually to help those who were in severe bind. The credit regulations of scripture were not intended to buttress the sort of unrestrained spending for the accumulation of unneeded luxuries that is so characteristic of today’s culture.
Third, money lent to family and relatives was to be freely given without interest.
Fourth, God provided for debt relief every seven years.
At the end of every seven years all debts throughout all of Israel were canceled: “This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the LORD’s time for canceling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your brother owes you (Deuteronomy 15:1-3). This seventh year debt forgiveness is a strong precedent that bankruptcy is not necessarily morally or ethically wrong.
Fifth, the bankruptcy laws in our country go a long way toward balancing the needs of both lender and borrower. The name of the game is fairness. The goal is to minimize the losses incurred by both lender and creditor. The creditor has a reasonable right to certain assets of the debtor. With Biblical precedence our bankruptcy laws have the benevolent intent that the debtor can recover from his hardship and enjoy a fresh start.
Chapter 11 bankruptcy is most prominently used by corporate entities to gain protection from their creditors in an effort to reorganize in such a way as to allow the corporation to continue and eventually pay back as much debt as is possible.
Chapter 13 bankruptcy allows for private individuals (mostly) to restructure their debt payment schedule so as to make it more manageable.
Chapter 7 bankruptcy is specifically designed to help people who have high unsecured debts like medical bills, credit card debt and unsecured personal loans. Chapter 7 governs the process of liquidating (selling) a debtor’s nonexempt property and distributing the proceeds to creditors. In most Chapter 7 cases, the filing goes into effect immediately, stopping creditors and debt collectors in their tracks, while enabling debtor’s to retain some control of their assets.
Well, Cheryl, I hope my answer helps to give a biblical foundation to some of your thoughts in this area. I have mentioned only a few biblical concepts and passages about bankruptcy. However, I have endeavored to give you some sort of helpful overview of the issues involved.
May God bless you and your finances with good days ahead.
Love, Roger