What Does the Bible Have to Say About Bankruptcy? Is It Ethical?
Is filing for bankruptcy ethical? What does the Bible say about the debt forgiveness industry?
For the religious among us, the answer to the ethical questions surrounding bankruptcy and debt forgiveness are likely to be found through our faith. Indeed, the Bible addresses the issue of lending and debt forgiveness on several occasions, but perhaps nowhere more directly than in Deuteronomy 15:
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.
Through the book of Deuteronomy, the Bible calls for debt forgiveness every seven years. Perhaps not coincidentally, the discharge of debts in chapter 7 bankruptcy is allowed to individuals every eight years. Therefore, it would appear that the Bible’s debt forgiveness principals are mirrored to a degree in the Bankruptcy Code. Surely, the similarities between the Book of Deuteronomy and the Bankruptcy Code aren’t numerous enough to establish an Establishment Clause violation, however, the basic idea is the same: debt forgiveness once every decade or so is equitable and just.
The lesson appears to be this: debt forgiveness is not to be taken lightly, BUT no one should go their entire lives saddled with unmanageable debts. It’s OK to ask for help once you’ve run out of options.
The Book of Exodus
In addition to the widely quoted Deuteronomy 15 passage, the Book of Exodus addresses the common practice of charging interest when money is lent:
If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.
While this quote does not provide direct guidance on the subject of debt forgiveness, it does speak to an important point about the terms that many lenders impose upon borrowers.
Credit card companies in particular charge what many would consider excessive rates of interest to the point where minimum monthly payments do very little to pay down the principal balance of the loan.
Over time, those consumers who find themselves in over their head with credit card debt have very likely already paid the full principal balance on the amount they’ve borrowed. What gets them in trouble are big late fees and compound interest. Viewed in this light, filing for bankruptcy to get out from under excessive interest rates seems a lot more palatable.
The Bottom Line
The bottom line is that bankruptcy should be a last resort for those in severe financial distress, but when it is needed, it is not unethical in the eyes of the Bible.
Rob Cohen, the Managing Partner of Cohen & Cohen P.C., is a bankruptcy attorney that practices in Colorado and Wyoming. He serves as a Chapter 7 Bankruptcy Panel Trustee, and has to date administered over 8,000 Chapter 7 bankruptcy estates. Rob is a Certified Consumer Bankruptcy Specialist, and was nominated for Denver Business Journal’s 40 under 40 in both 2014 and 2016.