The Moral Implications of Bankruptcy
A Close Look at Debt Forgiveness in the Bible
Bankruptcy provides a fresh start because it eliminates portions of a borrower’s debt. But many wonder if filing bankruptcy is irresponsible or even morally wrong. If a person lends you money because you have promised to pay it back, isn’t it wrong to use even a lawful procedure to free yourself from this obligation?
According to the Bible, no. Multiple passages, in fact, urge lenders to regularly practice forgiveness.
“At the end of every seventh year, you must cancel your debts. This is how it must be done. Creditors must cancel the loans they have made to their fellow Israelites. They must not demand payment from their neighbors or relatives, for the LORD’s time of release has arrived.” – Deuteronomy 15:1-2
While bankruptcy is an extensive, court-administered process, the Bible outlines a legal structure that releases debts automatically every seven years. There is no close analysis of each debt as there is in bankruptcy.
The Bible also condemns interest—in any amount. Meanwhile, we see a vicious debt cycle in today’s society, in which borrowers make substantial payments every month without reducing the principal because the level of interest is so high. The Bible compares this lifelong indebtedness to a master/slave relationship.
“If there is a poor man among your brothers…do not be hardhearted or tightfisted toward your poor brother. Rather be open-handed and freely lend him whatever he needs.” -- Deuteronomy 15:7-10
In general, the Bible promotes nothing less than compassion for the poor. Kindness to those in debt or poverty takes precedence over material obligations. The rich and/or the government were instructed to lend without collecting interest, forgive every seven years, and even provide income maintenance programs to ensure every family had what they needed, even during and after substantial misfortune. Guaranteeing economic security to every family was the highest priority, even above the collection of debts.
Ultimately, the Bible encourages a certain balance between the obligation to repay lenders and the need for compassion and forgiveness. Mercy, according to both the Old and New Testaments, must always override financial obligations.
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The current bankruptcy laws, substantially tightened by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, do not extend this compassion to the poor. Although the concept of bankruptcy is thousands of years old, obtaining relief from debt is arguably more difficult than it has been in recent decades. Today’s collection agencies may be pushing the idea that bankruptcy is immoral and irresponsible, but we must continue to have unfettered access to this legal forgiveness. As bankruptcy attorneys, we work on a regular basis to safeguard this access.
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