Bankruptcy and the Bible

Throughout the many years since establishing this firm, we have had the pleasure and opportunity of meeting a lot of really good people who sometimes feel uncomfortable about the fact that they may need to file for bankruptcy protection. We always tell our clients the same thing, which is that while filing for bankruptcy protection can be an emotional process, the decision to file for bankruptcy is a business decision, based upon the specific “numbers” of each individual case, as well as the specific facts and circumstances of each individual or family. Many clients are also able take comfort in the fact that bankruptcy has been recognized since Biblical times as an equitable way for one to address and deal with their individual credit issue(s).

“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).

While The Old Testament states that one is typically supposed to repay his or her debts, it also weights this duty with the concern & need for sympathy and understanding. In fact, the Old Testament is full of various instances of the requirement for the kind treatment of people in need, as well as with concern for the conservation of the individual family. These important elements were often considered more significant than the material concerns of paying back debt.

In this respect, we can see many parallels and similarities between The Old Testament & existing bankruptcy laws and policy. You see, laws are often implemented to serve some larger public policy. A simple but useful example would be a maximum speed limit, such as in a school zone, where the speed limit is even lower than in a residential area. The reason or public policy being promoted by such a "law" is the protection and safety of young children.

Similarly, both the Bible and current bankruptcy law allow for the elimination of certain debts under certain circumstances. They presumably do so in order to allow a "fresh start", as well as to grant relief from the stress and negative impact upon the individual or family and on life in general which can result from excess debt, creditor harassment, etc.

The Bible and bankruptcy are also both similar in that there must be a certain "waiting" period before debt can be eliminated once again. For example, an individual may only obtain a Chapter 7 discharge (as opposed to a Chapter 13 discharge) of their debt once every eight (8) years. Compare this to Deuteronomy 15:1-2, discussed above, which allows for the release of debts once every seven years. Prior to the 2005 amendments to bankruptcy law, an individual could file for Chapter 7 once every six years. There are also various shorter "waiting periods" from one Chapter 13 to the next, or from a Chapter 7 to 13 and vice versa, much like the "waiting period" required by the Bible.

The main point is that there needs to be some sort of balance between financial concerns such as the need to repay debt on the one hand, & the need for compassion, forgiveness, and preserving the family unit on the other hand. Both The Bible and the bankruptcy rules attempt to provide for that balance.