My father declared personal bankruptcy when I was a child. However, I grew to respect my parents even more when I learned how they handled themselves through this difficult time.
Many Christians feel guilty, or have been made to feel guilty by others over filing for bankruptcy protection. They feel guilty because the perception is that they ran up large debts on their credit cards and now are unable to pay back the money to their creditors. The truth is most personal bankruptcy is due to job loss, or uninsured medical expenses beyond their ability to control. And, many believe the Bible condemns bankruptcy. It’s important for us to define what is meant by the term “bankruptcy”; then, we can critically examine what the Bible tells us.
Wisely, those who governed us, many years ago, viewed the “debtors prison” ideas as clearly unchristian. So instead, under U.S. law, a debtor may receive a discharge of debts in a Chapter 7 bankruptcy once every eight (8) years. The Bible, likewise, contains debt forgiveness laws. Under Biblical law, the release of debts came at the end of seven (7) years.
“At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the LORD’s release” Deuteronomy 15:1-2
Justice says that if you agree to borrow money and repay the debt, you must pay it back. But, the law of mercy allows those who cannot pay debt, to obtain forgiveness for their obligations through bankruptcy.
Another guiding principle of U.S. bankruptcy law is one that requires persons who file for bankruptcy to have “clean hands.” Accordingly, a debtor may not be freed from debts involving fraud, drunk driving, and deliberate wrongdoing. Moreover, bankruptcy law does not allow the discharge of child support and alimony debts. Further, most student loans, taxes (Romans 13:1, 4, 7) and secured loans are not forgiven in bankruptcy. Through these restrictions, bankruptcy laws seek to balance justice and mercy (Proverbs 1:3).
I believe the biblical wisdom would permit bankruptcy for the following reasons: 1. A creditor forces the borrower into bankruptcy.
2. The borrower experiences such extreme financial difficulties that there is no option. There are occasions when bankruptcy is the only viable option when the financial challenges become too extreme to reverse. That option may be exercised only after all others have been explored, including good faith meeting with your creditors to resolve the issue.
3. The emotional health of the borrower is at stake. If the debtor’s emotional health is at stake because of inability to cope with the pressure of aggressive creditors, bankruptcy may be an option.
“Here’s an example for reason three. A husband deserts his family, and leaves behind bills and debts that were more than his wife can possibly afford. The emotional traumas of the unwanted divorce, coupled with harassment from unsympathetic creditors, are too much for her to bear. She needs the emotional and financial relief bankruptcy provides.” – Crown Ministries
I believe a Christian who finds it necessary to declare bankruptcy ought to observe the following principles:
1. Confession You ought to write every creditor or meet face-to-face with them and tell them how sorry you are that you incurred a debt you cannot pay and ask their forgiveness. Take a close Christian friend with you and pray together prior to the meeting. Whether or not they choose to forgive you, is their responsibility. If the creditor is a large corporation or institution with whom you do not have a personal relationship, a letter is appropriate.
2. Repentance Remorse is a deep feeling of sadness or regret. But, in repentance we have the idea of turning from previous sinful or unwise practices to live differently. In the area of finance, it seems wise to me that you get good, godly counsel on budgeting and personal finance to make it far less likely that you will fall into the old habits or unwise choices you made which may have contributed to your bankruptcy.
3. Restitution Legally bankruptcy releases you from most of your financial obligations. However, in the Old Testament, God required restitution if ones actions resulted in a loss to another. (Numbers 5:5, 7) Because you are a Christian you represent Christ; therefore, it seems wise to me that once you are through this process, perhaps six to twelve months later, that you meet with any individuals you owed money and tell them, “As God prospers me, and at some point I’d like to try to repay a portion of what I owe you. What do you expect of me?” You are not bound to agree with their request, but once you’ve done this with all your creditors, pray about how and what you will do. As God blesses you, make a decision about how much and how soon you will try to repay a portion of what you owed.
My father went to each of his creditors and asked them if they expected any repayment of the debts which the bankruptcy court discharged. Most were gracious and forgave him completely. Others asked for a portion, which he paid back over time. To him bankruptcy gave him release from the financial pressure, but not of the actual moral obligation to repay. It took him over seven years to pay everyone back, but he finally did.
If you choose this route, there are no biblical guidelines for determining how this is done. It seems wise to repay more to individuals who need it the most. Determine what is right, tell it to God and ask Him to provide the means to meet your goal. Also write it down and tell a trusted friend and ask him or her to ask you about this goal annually. This will give you some accountability to do what you intended to do.
4. Restoration In the process of bankruptcy, there are often people who have been hurt by you, whether it was intentional or not. Most often it is your spouse who trusted you to make good decisions. It may also be a relative or friend who lent you money who feels that you betrayed them. In the spirit of Matthew 5:23, 24, “Therefore, if you are offering your gift at the altar and there remember that your brother has something against you; leave your gift there in front of the altar. First go and be reconciled to your brother; then come and offer your gift.” Go to them, perhaps with another Christian and try to restore any broken relationship. The goal is to restore and heal that which was broken and live in peace with others.
5. Get Good Counsel. The pain and shame of bankruptcy makes it very difficult to make good choices when it feels like it’s a matter of survival, week-to-week. You will need wise counselors for possible depression, good legal counsel, budgeting, and Bible study.
Bankruptcy is not the end of your life as painful as it seems right now. What will live on is your personal reputation as a follower of Jesus. Guard it well.
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