Christian Financial Advice and Biblical Stewardship

Bankruptcy and Biblical Principles

Bankruptcy and Biblical Principles

The English word bankruptcy comes from two Latin words meaning "bench" and "break." Under Roman law, if a debtor was delinquent in paying what he owed, his assets were gathered together and divided among the creditors. Then, the creditors ceremoniously broke the debtor's workbench as punishment to him and a warning to other indebted tradesmen.

The Bible doesn't prohibit bankruptcy because the Bible doesn't mention it. But the Bible clearly says that a believer should be responsible for his or her promises and repay what he or she owes. "When you make a vow to God, do not be late in paying it; for He takes no delight in fools. Pay what you vow! It is better that you should not vow than that you should vow and not pay" (Ecclesiastes 5:4-5).

If that's not clear enough, consider this: "The wicked borrows and does not pay back, but the righteous is gracious and gives" (Psalm 37:21).

Would God direct a person to file bankruptcy? Let's ask the question another way. Would God refute His own Word? The answer to both questions is, No!

Bankruptcy is not a scriptural resolution; it is a legal remedy. It's understandable that under the pressure of excessive debts a Christian might see bankruptcy as a quick fix; but relief from financial pressure does not make bankruptcy scriptural.

Then will God forgive you if you have filed bankruptcy? Certainly. As Christians, God says that if we will "confess our sins, He is faithful and righteous to forgive us our sins and to cleanse us from all unrighteousness" (1 John 1:9). However, if we insist that "we have not sinned, we make Him a liar and His word is not in us" (1 John 1:10).

What if you didn't initiate the bankruptcy? Sometimes several creditors will originate bankruptcy against a person or corporation in order to force liquidation of the person or corporation's assets. If creditors initiate such an involuntary bankruptcy, a different situation exists. Nevertheless, a Christian's responsibility is to repay according to the terms of original agreements when borrowing. "Do not withhold good from those to whom it is due, when it is in your power to do it" (Proverbs 3:27).

Should you take the legal remedy of court protection until you have the ability to repay? That's an individual decision. First and foremost, a Christian must be willing to accept the absolute requirement to repay everyone he or she owes. And God's Word makes no distinction between a personal debt and a business debt. When you borrow money for any purpose, you make a vow or promise to repay what you borrowed.

In the short run, you may have to live a very frugal life. That may not seem fair, but in the long run you will have obeyed God, and that's all that will be important 100 years from now and for eternity.

That's not to say that you shouldn't seek court protection until you're able to set up a repayment plan. That is a decision between you and the Lord. But, even if your bench gets broken, you can still be a James 1:22-25 Christian and do what God requires.

Why Bankruptcy is not the answer

I couldn't believe what I was reading. In fact, I was shocked. A popular personal finance expert wrote this advice on the subject of bankruptcy: "If you cannot get out of your financial mess in two years, you should consider filing for personal bankruptcy."

I can't tell you how much I disagree with that advice, but I can give you the top three reasons:
1. Two years is not long enough. Any challenging debt situation will require at least two years to fix. You cannot stop living until you get out of debt. You should not, as some experts advise, forgo saving so you can send every available nickel to your credit card company. That is foolish because you are making no allowances for stuff that's sure to happen while you're getting out of debt, like needing new tires, or replacing a busted water heater. You're going to face at least a few Christmas seasons while you're getting out of debt. If you are not setting money aside for that through the year, you're setting yourself up to fail miserably. Getting out of debt needs to be a methodical, slow and steady process. Setting a two-year time limit nearly guarantees that bankruptcy will be the only option.

2. Bankruptcy may be legal, but it's not moral. Whether you got yourself into a terrible loan or not, you did sign the papers. No one held a gun to your head. Now, you have a moral responsibility to repay, even if your creditor is filthy rich and wouldn't miss your measly repayment. Had I filed for bankruptcy to get a "fresh start" by stiffing our creditors, I am nearly certain I would not have learned the lessons I needed to learn.

3. It's too easy. Once you've filed for bankruptcy, your chances of doing it again increase dramatically. Statistics say you have a 50 percent greater chance of filing again in seven years. I've been through terribly deep financial trouble. I know how difficult it is to make the long journey back. The most important thing that happens is the change of attitude, breaking old habits and forcing new ones.

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