What does the Bible teach
about DEBT and BANKRUPTCY?

Q. What does the Bible teach about debt and filing for BANKRUPTCY?

(Submitted by: D. C.)

A. There are basically two principles that come up here, which admittedly are somewhat in tension.

On the one hand, Christians should keep their promises, and pay creditors what they owe. This is part of the general principle of the ninth commandment:

"You shall not bear false witness against your neighbor." (Exodus 20:16, NKJV and emphasis throughout)

Similarly, there's Numbers 30:2, which concerns vows to God, but I believe it's fair to apply this in principle to debtors paying creditors their debts back:

"If a man makes a vow to the Lord, or swears an oath to bind himself by some agreement, he shall not break his word;  he shall do according to all that proceeds out of his mouth." (Numbers 30:2)

Yet on the other hand, God is well aware of poor people who couldn't pay back what they owe. The loans they got were really gifts by the creditor to the debtor in poverty. Notice the law under which debts were completely cancelled every seventh year in a seven year cycle that lead up the to Jubilee year in the fiftieth year, which is stated in Deuteronomy 15. It's considerably longer than just verses 1-2, but I'll just quote that part here:

"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)

Interestingly, not only did God say that interest should NOT be charged on a loan to the poor, he forbad the lender from keeping things necessary for living even when the borrower offered such as security:

“If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him;  you shall NOT charge him interest.  If you ever take your neighbor’s garment as a pledge (security for payment of a debt), you SHALL return it to him before the sun goes down.  For that is his only covering, it is his garment for his skin.  What will he sleep in?  And it will be that when he cries to Me, I will hear, for I am gracious (and, by implication, the lender is not)." (Exodus 22:25-27)

God recognizes how people in poverty can get so buried in debt they can't ever be freed by their own efforts. Similarly, God freed the slaves every seventh year who had entered slavery (at least often) because they couldn't pay their debts.

So the way I'd consider these Biblical principles is that a person should strive to pay back their debts. If they can't pay them back, such as meeting the minimum monthly payments on credit card bills even after cutting back at home (such as moving to a cheaper apartment or house, giving up a car and/or getting cheaper ones, eating out much less, etc.), then it might be time, if its available, to file for bankruptcy. Filing for bankruptcy, however, should NOT be used as an instrument to escape debts through a scheme to defraud creditors, such as a case I heard of someone who would periodically file for personal bankruptcy AFTER running up debts to buy assets that then were put in his wife's name (assets which, according to the law at the time, creditors could not take from the wife for the debts incurred by her husband).

In conclusion, I cannot say that filing bankruptcy is necessarily a sin in God's sight. It depends, in part, on the circumstances. I would maintain that someone should still try to pay something, especially when most credit card debts, etc., are NOT run up to put food on the table and avoid the worst kind of deprivation, which is described in Deuteronomy 15, but for luxuries and "wants," not "needs." Owning at least one or two pairs of shoes is a "need" but desiring ten or twenty pairs is obviously a "want."