May a Christian Declare Bankruptcy?

By Wayne Jackson

“Is it permissible for a Christian to file for bankruptcy?”

This is a question that cannot be answered with a simple “yes” or “no.” It must be considered in the larger context of responsible Christian finances. One needs, therefore, to lay some foundation.

Communism is an ideology that contends that all property should be owned and controlled by the state. Capitalism, on the other hand, maintains the right of individual ownership and personal autonomy. Neither of these philosophies represents the biblical position in the most ideal sense. The scriptural concept is that God is the owner of the earth and everything therein. He is Lord of both man and beast. Hear him:

“I will take no bullock out of thy house, Nor he-goats out of thy folds. For every beast of the forest is mine, And the cattle upon a thousand hills. I know all the birds of the mountains; And the wild beasts of the field are mine. If I were hungry, I would not tell thee; For the world is mine, and the fulness thereof” (Psa. 50:9-12).

Human beings, therefore, are but stewards of Jehovah’s property. A steward is a manager, one charged with overseeing the affairs of another, with accountability expected, and to be exacted in due season (Lk. 16:2,11-12). “It is required in stewards that a man be found faithful” (1 Cor. 4:2). This means a Christian must be extremely prudent in the handling of all economic resources placed at his disposal.

Reckless indebtedness is a national scandal. Our nation’s leaders spend far beyond what the national economy can afford, and the country’s citizenry generally follows the same carefree pattern.

Frequently (almost certainly most often) the bankruptcy procedure is the offspring of irresponsible spending. Almost 1.5 million Americans filed for bankruptcy in 2001! Something is drastically wrong.

In Bible times, indebtedness was generally the circumstance of only the poorest of people. There were laws designed to protect the impoverished person who labored under a debt to his fellows. Those who incurred necessary debts in times of great hardship found relief in the sabbatical year (Dt. 15:1-2). Certain forms of collateral were protected by law (Ex. 22:26-27; Dt. 24:17). Those who abused the poor through financial exploitation were strongly condemned (Ex. 22:25; Lev. 25:35-37).

This fact must be clearly understood, however. In those days, lending generally was utilized to help the person who was in a severe bind, under which the very welfare of his life was jeopardized. The credit regulations of scripture were not intended to buttress the sort of unrestrained spending for the accumulation of manifold luxuries that is so characteristic of today’s culture — especially in this country.

Modern bankruptcy procedures (which go back only about a century) have been developed to provide a level of balanced legal protection for both the creditor and the debtor. The creditor has a reasonable right to certain assets of his debtor, if there are such. Also, though, the law carries the benevolent intent of protecting the debtor, with the aim that he, hopefully, can recover from his hardship and enjoy a fresh start. Unfortunately, the system is subject to significant abuse, and often is manipulated to unjust ends.

Here are some principles that should guide the Christian in such matters.

The child of God should avoid spending with abandon. When he thrusts himself head-over-heels in debt for frivolous things, when he repeatedly mortgages his property for more “toys,” he is not serving God as a faithful steward.

When he “maxes out” multiple credit cards, for which he cannot make his payments, he is irresponsible. When he simply must have the latest gadgets, or he feels compelled to “keep up with the Joneses” (who probably have already refinanced anyway), he has acted recklessly, and he is in violation of the scriptural concept of wise management. In short, he has sinned.

Under such circumstances, the Christian who fancies that he may simply “declare bankruptcy,” and walk away from his indebtedness with minimal repayment, so that all future earnings are “off limits” to his creditors, is laboring under a severe misapprehension of his sacred responsibility. God will not hold such a one blameless.

Paul admonished, “owe no man anything” (Rom. 13:8). Does this passage mean that the Christian is absolutely prohibited from incurring debts, such as buying a home, or an automobile, on credit? No, but it does suggest that when one enters into a voluntary agreement with others, promising to repay his indebtedness in a timely and honest fashion, he is morally required to fulfill his promise.

Let us suppose, though, for the sake of example, that one is thrust into an extraordinary indebtedness by virtue of circumstances beyond his control. Perhaps he has been overwhelmed with drastic and unexpected medical expenses. Might he employ the bankruptcy procedure for some immediate relief, while he tries to pull his resources together?

Many believe he could pursue such course of action with no breach of ethics. Nonetheless, he still would be obliged to repay his debts as soon as possible, and to the full extent of his ability. There is a form of bankruptcy (Chapter 13) that allows one to restructure his debt payment schedule so as to make it more manageable.

Man-made legal procedures, however, do not provide a license for unethical conduct. Human law does not override divine law. “The wicked [person] borrows but does not pay back” (Psa. 37:21).

In conclusion, it is possible that, under certain dire circumstances, the child of God might be able to utilize the temporary protection of the bankruptcy code. He must be sure, however, that he does not abuse his creditors, and that he makes a diligent and honest effort to take care of his financial obligations — even should such require a protracted period of time.

Honesty is not merely the “best” policy for the Christian — it is the only policy!

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About the Author

Wayne Jackson has written for and edited the Christian Courier since its inception in 1965. He has also written several books on a variety of biblical topics including The Bible and Science, Creation, Evolution, and the Age of the Earth, The Bible on Trial, and a number of commentaries. He lives in Stockton, California with his dear wife, and life-long partner, Betty.