Is Bankruptcy An Option for Christians?
Most would offer little argument to the observation that our society is currently characterized by easy credit. Just open the mail! That coupled with a materialistic mindset and an “I owe it to myself” perspective has fueled an incredible financial overextension in millions of homes. Sadly, when the pressure to repay tightens, as it surely will, a common and widely promoted solution is bankruptcy. This too is understandable given the failure to connect actions and decision to outcomes and consequences. So, irresponsible behavior is rewarded in the financial realm; of course this is true in so many other areas of life in the United States as well.
The question simply put is, “should bankruptcy be an acceptable solution for those who claim to be genuine believers?” Let me give my answer right up front – “no and yes.” A brief explanation is in order. These thoughts should be viewed as pastoral comments. Though based on what I believe to be the clear teaching of Scripture, this brief study should not be viewed as an exhaustive exegesis.
Some Formative Principles
Money must be valued as a gift given to us by God. As such, our money, indeed all our possessions, ultimately belong to God. We are just managers of whatever God gives us. The wisdom of James 1:17 declares1, “Every good thing given and every perfect gift is from above, coming down from the Father of lights, with whom there is no variation or shifting shadow.” Proverbs 10:22 says it this way, “It is the blessing of the LORD that makes rich, and He adds no sorrow to it.” And yet, let’s be clear about the warning that this gift of money, indeed any wealth or possession, can never be the object of our affection (1 Timothy 6:9).
One of the reasons God gives us money is so that we can meet our basic needs. The heavenly Father has promised to provide for us (Matthew 6:30-32). In western society today, He does this primarily by providing an income. It is up to us to use it wisely.
The use of money is a spiritual matter. One of the great lessons from the Lord’s teaching story about the unrighteous steward is that the Lord gauges how we manage our money as a barometer for dispensing greater management opportunities. Luke 16:10-13 records the account.
"He who is faithful in a very little thing is faithful also in much; and he who is unrighteous in a very little thing is unrighteous also in much. 11 "Therefore if you have not been faithful in the use of unrighteous wealth, who will entrust the true riches to you? 12 "And if you have not been faithful in the use of that which is another's, who will give you that which is your own? 13 "No servant can serve two masters; for either he will hate the one and love the other, or else he will be devoted to one and despise the other. You cannot serve God and wealth.
So, the contemplation of bankruptcy generally must be viewed as symptomatic of poor decision making that carries potential spiritual ramifications. In light of this, right thinking believers will understand the significance of money management and will train themselves to work hard at being a good manager. They will refuse to engage in the reckless spending that is so prevalent in our society.
A Guiding Concept: God’s expectation for believers is that they owe nothing.
That believers are expected to owe nothing is clearly stated in Romans 13:7-8, “Render to all what is due them: tax to whom tax is due; custom to whom custom; fear to whom fear; honor to whom honor. Owe nothing to anyone except to love one another; for he who loves his neighbor has fulfilled the law. “A good definition of this term “owe” might be, “…to be under obligation to make a payment as the result of having previously received something of value…”2 -What is being said here? Must we never borrow? I believe the underlying assumption is that it is not wrong per se to contract a debt. In fact, the term “owed” routinely is used to describe normal circumstances (Philemon 1:18, Luke 7:41; 16:5,7). Borrowing may not always be wise as Proverbs 22:7 warns, “The rich rules over the poor, And the borrower becomes the lender's slave.” But what is wrong is failure to satisfy our obligations; obligation being the broader sense of this word and not limited to finances. I believe this sense of obligation also requires repayment according to the terms of the contract.
Other Scriptures are corroborating indicators that repaying debts is the normal practice for Christians. Matthew 18-23-27 records a vivid teaching lesson.
"For this reason the kingdom of heaven may be compared to a king who wished to settle accounts with his slaves. 24 "When he had begun to settle them, one who owed him ten thousand talents was brought to him. 25 "But since he did not have the means to repay, his lord commanded him to be sold, along with his wife and children and all that he had, and repayment to be made. 26 "So the slave fell to the ground and prostrated himself before him, saying, 'Have patience with me and I will repay you everything.' 27 "And the lord of that slave felt compassion and released him and forgave him the debt.
The point of this kingdom story is the granting of mercy. Such action in no way mitigates the obligation to repay what is owed. If anything, it underscores that the obligation to satisfy the debt continues.
The simple account of the “seminary” student loosing a borrowed axe underscores the mindset of repayment as well. It is recorded in 2 Kings 6:5, “But as one was felling a beam, the axe head fell into the water; and he cried out and said, "Alas, my master! For it was borrowed."
Solomon in Proverbs 22:26-27 wonders why anyone would be shocked when he suffers repossession if he is unable to make payments on a loan which he guaranteed for a third party, “Do not be among those who give pledges, Among those who become guarantors for debts. 27 If you have nothing with which to pay, Why should he take your bed from under you”?
After Elisha miraculously provided the widow with oil so that she and her children would not have become slaves to her creditors he instructed her to pay her debts with the proceeds of the sale of the oil. This remarkable account is found in 2 Kings 61-7,
“Now a certain woman of the wives of the sons of the prophets cried out to Elisha, "Your servant my husband is dead, and you know that your servant feared the LORD; and the creditor has come to take my two children to be his slaves… 7 Then she came and told the man of God. And he said, "Go, sell the oil and pay your debt, and you and your sons can live on the rest."
Thus, we learn that repayment of debt is expected even during dire circumstances. Discharge of debt was not a valid option for this struggling single mother.
So, up to this point, my answer to the question as to whether bankruptcy is a valid option for a believer in order to solve seemingly insurmountable debt is “no.” However, are there possible exceptions? I believe the answer to this question is “yes.”
The Romans 13:8 text cited above contains an exception, “…except to love one another…” So, in effect he is saying that we should never be paid up in the area of owing love! Always have more love to give. Might there also be valid exceptions in the case of financial debts? Three jump to mind. There may be others. Perhaps bankruptcy is a valid option in the case of insurmountable debt accumulated by poor decisions in which there is no reasonable hope of repayment according to the terms of the contract. Or perhaps it is acceptable in the case of a mountain of debt as a result of highly unusual and unforeseen circumstances over which the debtor has no control (such as catastrophic loss of health). Or perhaps bankruptcy is reasonable in the case of unscrupulous lenders (however, it is always the responsibility of the borrower to know the terms of the contract).
Indeed, the Old Testament Year of Jubilee practice in Israel demonstrates God’s commitment to compassion in financial and property matters. However, the specific application of this practice to defend bankruptcy as a solution to indebtedness in contemporary culture can not be justified.
The Christian debtor is certainly free to negotiate better terms with his creditors. However, the debtor must pay according to the terms of the contract unless a mutual agreement regarding other terms can be negotiated in good faith with the creditor. This would be a in which the creditor voluntarily chooses to modify the terms of the contract. In the case of bankruptcy, the creditor is not able to make a voluntary choice.
As I understand it, a Chapter 13 bankruptcy allows for a re-organization so that the debtor is alleviated from immediate collection pressures and yet the creditor is paid all or some of what is owed over time according to an approved plan. On the other hand, a Chapter 7 bankruptcy discharges all debts permitted by law with no remaining legal obligation.
However, even though a declaration of bankruptcy may provide a legal discharge of debt, the believer still bears an obligation to repay. In other words, regardless of what type of bankruptcy is filed, the obligation is never discharged biblically. The obligation still exists morally if not legally. This may be a case God’s requirement verses the government’s permission. The believer always must decide in favor God’s requirement. Hence, even after bankruptcy, the believer who is determined to honor the Lord will execute a plan to repay his creditors a reasonable amount. Perhaps a wise financial planner committed to biblical principles can assist him draft such a plan.
Psalm 37:21 does not paint a pretty picture and does not leave much wiggle room, “The wicked borrows and does not pay back, but the righteous is gracious and gives.”
So what is the bottom line? It is that you should borrow carefully – you are always obligated to repay. If you find yourself in dire straights bankruptcy should be contemplated only as a last resort. And by all means remember that, regardless what anyone says, bankruptcy always has negative consequences. You do not merely walk away unscathed.
Here are some prior options and questions you should consider. Have you entered into a personal dialogue with your creditors in an attempt to work something out? Did you do this early on? Have you analyzed how you got yourself into this predicament so that you can avoid a repeat performance? Have you sought and followed biblical counsel? Have you pursued alternative sources for funds such as family members, selling possessions, or an additional job? Have you pared down your lifestyle to the bare essentials? Are you honoring God through regular giving to your church? Have you taken personal accountability for your decisions?
Here are some simple suggestions that, if implemented, will diminish the likelihood of finding yourself in such financial straights that bankruptcy enters the conversation.3
- Adopt a budget and live by it. Keep accurate records.
- Plan for financial breathing room. Disaster awaits those who have zero non-obligated funds and are thus unable to deal with unexpected contingencies.
- Avoid all consumer debt. Especially avoid borrowing for depreciating items such as a car. If you do use consumer debt, make sure take a position wherein you can pay off what you owe by liquidating the indebted item at significantly below market value.
- Use credit cards only for convenience and/or record keeping only; and only if you pay the balance in full every month.
- Be thoroughly familiar with the terms of any loan you contract.
- Adopt a long range financial plan. Where do you want to be down the road and how will you get there?
- If you get in a financial pinch, no matter what the cause, get help early.
1 Unless otherwise noted, all Scripture references are taken from the New American Standard Bible-Updated Edition (California: Foundation, 1999 )
2 Louw-Nida Lexicon (57.219-57-223) as accessed through Bible Works 7, 2006
3 I am indebted to financial consultant and fellow elder, Steve Link, for sharpening my thoughts on this issue.
© Copyright. Joseph Flatt. 2014. All rights reserved. May be used for educational purposes without written permission but with a citation to this source.