- Chris Rampley
What Does the Bible Say About Bankruptcy?
Many of the basic concepts of our modern day Bankruptcy Code can be traced back to biblical times. Specifically, the concept of a discharge of indebtedness is directly traceable to both the Old Testament and the New Testament.
The Old Testament, in Deuteronomy, contains the first modern pronouncement respecting discharge.
At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the Lord's time for cancelling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your brother owes you.
Deuteronomy, 15:1-3; see generally Exodus, 21:2 (“If you buy a Hebrew servant, he is to serve you for six years. But in the seventh year, he shall go free, without paying for anything.”); and Leviticus, 25:10 (“Consecrate the fiftieth year and proclaim liberty throughout the land and to all its inhabitants. It shall be a jubilee for you; each one of you is to return to his family property and each to his own clan.”). In other words, Deuteronomy provides that all debts to non-foreigners are to be discharged at the conclusion of every seven years period. Consistent with Deuteronomy, the old Bankruptcy Act of 1938, prevented a debtor from filing for bankruptcy within seven years of a prior filing. In 1978 Congress overhauled the Bankruptcy Act and in so doing shortened the Biblical seven years to six years.
The New Testament also makes reference to the concept of debt forgiveness.
Saint Matthew states the following in his instructions on prayer: “Forgive us our debts, as we also have forgiven our debtors.” Matthew, 7:12. Despite the usage of the words “debt” and “debtors,” the foregoing passage is not intended to be interpreted narrowly and in all likelihood speaks generally of the forgiveness of sin. Nonetheless, it is interesting to take note of the example Saint Matthew uses to teach the principle of forgiveness. In the parable of the unmerciful servant Matthew explains the tale of a king who wanted to settle accounts with his servants. Matthew, 18:21-35. The parable begins with the master seeking to settle the account of a servant who's debt to the master is ten thousand talents (more than a lifetime's worth of wages). Initially, the master orders the servant and his family be sold into slavery, however, after hearing the pleas from the servant for mercy, the master recants the order and releases the servant from all obligations. Subsequently, the servant approaches a fellow servant that owes him money and makes demand for payment. The fellow servant, despite pleading for mercy is thrown into debtor's prison. Upon learning of the treatment of the fellow servant, the master turns the servant over to the jailers to be tortured until his debt to the master is paid in full. In short, Matthew uses the concept of debt forgiveness to teach the principle of forgiveness referenced in the Lord's Prayer (Matthew, 7:9-13).
Other bankruptcy concepts found in the Old Testament include certain exemptions, rights of redemption, security interests, pledges and priority of payment.
For example, the exemption for tools of the trade can be traced to the following verse:
Do not take a pair of millstones – not even the upper one – as security for a debt, because that would be taking a man's livelihood as security.
Deuteronomy, 24:6. Likewise, the exemption for personal clothing is traceable to the following scripture:
If you take your neighbor's cloak as a pledge, return it to him by sunset, because his cloak is the only covering he has for his body. What else will he sleep in? When he cries out to me, I will hear, for I am compassionate.
Exodus, 22:26-27; see also, Deuteronomy, 24:12-13. Moreover, the Bankruptcy Code's concept of priority respecting the payment of wages owed by a debtor in bankruptcy finds its roots in the Old Testament.
Do not take advantage of the hired man who is poor and needy, whether he is a brother Israelite or an alien living in one of your towns. Pay him his wages each day before sunset, because he is poor and is counting on it. Otherwise he may cry to the Lord against you, and you will be guilty of sin.
Many people feel terrible for needing to file bankruptcy and are seeking answers about whether or not bankruptcy is the correct thing, or even the moral thing, to do. If you can reasonably repay your debts without impoverishing yourself then you should do so! However, if your debts are overwhelming you then bankruptcy might be the best option. Please feel free to give my office a call and we will try to help you to find the best answer for you!
Chris Rampley, Bankruptcy Attorney