Сhristians have long had a tortured relationship with the idea of bankruptcy. Bankruptcy provides an opportunity for a person to get a re-set on their financial life when they are totally underwater. At its core, bankruptcy is a functional reprieve. It allows people, in the case of chapter seven, to discharge their debts entirely. The consequence is that they will have to live with the credit consequences of their decision. It will stay on their credit report for years, making it hard for them to get additional credit, housing, and the like. Of course, there is also the important distinction that secured debt will be recovered through the property the person has used on the debt. Unsecured debt will leave the creditor scrambling. Credit card companies, for instance, would lose out on the money they cannot collect. People who do declare for bankruptcy receive protection from collection attempts and phone calls through their move. This is a great thing for many people who are receiving countless calls and letters per year. In short, they find themselves unable to work or enjoy their lives because of the stress of debt they cannot pay.
Other forms of bankruptcy allow for restructuring of debt. They then come up with plans to pay off the creditors through this plan. It can be a good way for the court to oversee the debt payment efforts while allowing the creditor to actually have control over their financial life. See Stephen B. Parson, The ABCs of Debt: A Case Study Approach to Debtor/Creditor Relations and Bankruptcy Law 2d (2013).
Some believe Christians should not declare because this is an abdication of their duty. Namely, these people suggest that Christians are obligated to pay their debts because a debt is truly just a promise to pay. Not paying the debt, through the declaration of bankruptcy, would be a lack of honor. Truly, according to this view of things, it would be a sin to declare bankruptcy.
However, a close reading of the Bible indicates that several passages provide justification for bankruptcy. The Bible strongly condemns those people who would take advantage of the poor through coercive financial means. Jesus, of course, went into the Temple and turned over the tables of the money changers, an indication that the excess of banks and their exploitation might be against God. Importantly, the Bible also suggests that there should be relief for people who find themselves in over their head in debt. Debt was automatically discharged every so often. This was done so that people could recover from their financial distress. It was never intended that a system exist like today, where banks and creditors are able to charge big interest and then chain a person to his or her debt for decades to come. This would have been unconscionable in Biblical times. Back then, certain types of collateral could never be collected on, protecting people from hawkish behavior from credit companies. With this in mind, there is basis for concluding that people should be able to discharge their debt in bankruptcy. It provides a way through which individuals would be able to get out from under the predatory behavior of creditors in situations where they truly could not pay it back. However, the Bible and Christ call on people to be honorable. They are supposed to try to pay back their debts, so if the debt is something that can be paid back, then it should.
- Stephen B. Parson, The ABCs of Debt: A Case Study Approach to Debtor/Creditor Relations and Bankruptcy Law 2d (2013).
