It is helpful to look at various religious aspects of bankruptcy and find out what the scripture says about bankruptcy. It should not be treated as a moral sin. However, it is accountability matter, and must be analyzed in that perspective only. Before I analyze this issue, I must say that I have researched this matter, and many things written below are not originally written by me. At the most, I researched and compiled them. The credit should go to those folks as I am indebted to them with my sincerest feelings.
Many religious folks feel guilty about seeking to file for bankruptcy protection. They feel guilty because they ran up large debts on their credit cards and now are unable to pay back the money to their creditors. These folks thinks that the scriptures has condemned bankruptcy.
In the United States of America, our founding fathers recognized the importance of bankruptcy. In the U.S. Constitution, they provided our government with the right to make bankruptcy laws. The bankruptcy laws and procedures we have today, instituted by our federal government, provide relief for overburdened debtors. As we all know, people who are under severe debts can get a fresh start. Normally, a bankruptcy will discharge the debtor’s obligation to repay some or all debts.
Bankruptcy contemplates the “forgiveness” of debt. The Bible, likewise, has debt forgiveness laws. Under U.S. law, a debtor may only receive a discharge of debts in a Chapter 7 bankruptcy once every eight (8) years. Under Biblical law, the release of debts came at the end of seven (7) years.
“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).
The Bible refers to debt as a type of bondage: “…the borrower is a slave to the lender” (Proverbs 22:7). Thus, the debtor is a slave to the creditor. Interestingly, the Bible declares, at the end of the sixth year:
A guiding principle of U.S. bankruptcy law requires persons who file for bankruptcy to have “clean hands.” Accordingly, a debtor may not be freed from debts involving fraud, drunk driving, and deliberate wrongdoing. Moreover, bankruptcy law does not allow the discharge of child support and alimony debts. Further, most student loans, taxes (Romans 13:1,4,7) and secured loans are not forgiven in bankruptcy. Through these restrictions, bankruptcy laws seek to balance justice and equity (Proverbs 1:3).
As with most biblical principles, there is a balance. If you can repay your debts, you must. If you cannot, then you should decide how God would have you freed from the bondage of debt. Our modern bankruptcy laws were derived from the Bible (Deuteronomy 15:1-2). Further, the Bible describes financial miracles (2 Kings 4:1-7). Ultimately, you must seek wisdom and guidance from God as to the direction He would have you choose. God promises to give such wisdom to those who ask with a trusting heart (James 1:5-7; Proverbs 3:5-6). Further, the Bible admonishes us to seek Godly counsel (Psalms 1:1; Proverbs 12:15, 11:14, 15:22).
Leviticus 25:39 makes it clear that people are generally expected to pay their just debts. However, this moral and legal obligation to pay just debts must be balanced by such considerations as the need for compassion and the call to cancel debts at periodic intervals, found in
What the Old Testament Says?
Within the areas of economic justice and stability, the Old Testament is filled with examples of compassionate treatment of the poor, and with
preservation of the family unit. Deuteronomy 15:7-10 is particularly forceful by stating, “If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother”
The cancellation of debt in the Old Testament Deuteronomy 15:1 clearly provides for such law release with the following language: “At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor,
his brother, because the Lord’s release has been proclaimed”. The debtor’s payment or non-payment of debts was not in question, and liability didn’t matter at all—it was a strict statement without any wiggle room, must like the clear statement in Deuteronomy 5:17 that “Thou shall not kill..”
The Bible on Interest
The Biblical use of the term “usury” corresponds to our modern word “interest” rather than to the notion of “excessive interest” to which we generally apply the term usury today. Only a small number of us would seriously question the morality of profiting from a loan at normal interest rates, though the Talmud prohibits the lending of money with interest.
Exodus 22:25 states “If thou lend money to any of my people that is poor by thee, thou shalt not be to him as an usurer, neither shalt thou lay upon him usury.” Leviticus 25:35 says, “And if thy brother be waxen poor, and fallen in decay with thee; then thou shalt relieve him: yea, though he be a stranger, or a sojourner; that he may live with thee.” Deuteronomy 23:19 says,
“Thou shalt not lend upon usury to thy brother; usury of money, usury of victuals, usury of any thing that is lent upon usury.”
Psalm 15:5 characterizes a righteous man as one who, among other things, “lends his money without usury.” Both Ezekiel 22:12 and Nehemiah 5:0-11 condemn lending money with interest, especially to the poor. And Ezekiel 18:13 list the taking of interest among sins worthy of death.
The prohibition on interest is based on God’s covenant with Israel and upon the compassionate treatment of various oppressed groups: the resident alien; the widow; the orphans; and the poor. Exodus 22:25-27 states the law in explicit terms:
“If you lend to one of my people among you who is needy, do not be like the money lender; charge him no interest. 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 on? When he cries out to me, I will hear, for I am compassionate.”
Leviticus 25:35-37 provides that “If one of your countrymen becomes poor and is unable to support himself among you, help him as you would an alien or a temporary resident, so that he can continue to live among you. Do not take interest of any kind from him, but fear your God, so that your countryman may continue to live among you. You must not lend him money at interest or sell him food at profit.” Finally, Deuteronomy 23:19-20 provides: “Do not charge your brother interest, whether on money or food or anything else that may earn interest.”
Jesus clearly had these Biblical principles in mind when he admonished the “money changers” and removed them from God’s house, the sacred Temple. In John 2:14 Jesus “poured out the changers of money and overthrew the tables”. Jesus, in fact, was always true to the principles underlying the prohibition of usury and required debt forgiveness and the notion of the importance of placing love and compassion above greed and wealth. In Luke 6:34-35 Jesus said: “And if you lend to those from whom you hope to receive, what credit is that to you? Even sinners lend to sinners, to receive as much again. But love your enemies and, do good, and lend, expecting nothing in return, and your reward will be great, and you will be sons of the Most High; for he is kind to the ungrateful and the selfish.” The followers of Jesus were to be concerned with the welfare of others, even when met with hatred and abuse.
The consistent teaching of both the Old and New Testaments is that compassion, mercy and justice are to override purely economic concerns, such as loans. Religious people are to be gracious to all, even debtors. Jesus said that God causes the rain to fall on the just and the unjust alike, and in Mark 10:25 he said that “[lit is easier for a camel to go through the eye of a needle, than for a rich man to enter in to the kingdom of God”. And in Luke 16:9 he said:
“I tell you, use worldly wealth to gain friends for yourselves, so that when it is gone, you will be welcomed into eternal dwellings”, and to “forgive and ye shall be forgiven” Luke 6:37.
The compassion of the Scriptures, including the setting aside of legitimate rights of lenders, was typical of economic relationships in the economy of early Judeo-Christian societies. The central theme is one of stability—a stable society with a guarantee of economic security to each family. Wealth was viewed as a blessing from God (Deuteronomy 8:11-18, 28). This blessing resulted from obedience and was based on God’s compassion. The tithing for the poor, the gleaning laws, the year of the Jubilee, were all tangible ways that Israelites could show compassion for each other and honor God by following His law. Beyond income-maintenance programs, the Biblical Law provided a permanent mechanism—such as the Sabbatical year and Jubilee—to ensure that temporary misfortune barred no family from full participation in economic life.
Torah and Bankruptcy
In the Torah, or Old Testament, every seventh year is decreed by Mosaic Law as a Sabbatical year wherein the release of all debts that are owed by members of the community is mandated, but not of “foreigners”. The seventh Sabbatical year, or forty-ninth year, is then followed by another Sabbatical year known as the Year of Jubilee wherein the release of all debts is mandated, for fellow community members and foreigners alike, and the release of all debt-slaves is also mandated. The Year of Jubilee is announced in advance on the Day of Atonement, or the tenth day of the seventh Biblical month, in the forty-ninth year by the blowing of trumpets throughout the land of Israel.
Quran and Bankruptcy
In Islamic teaching, according to the Quran, an insolvent person was deemed to be allowed time to be able to pay out his debt. This is recorded in the Quran’s second chapter (Sura Al-Baqara), Verse 280, which notes:
“And if someone is in hardship, then let there be postponement until a time of ease. But if you give from your right as charity, then it is better for you, if you only knew.”