Let’s talk about the morality of being in – and being unable to get out of – debt.
There’s no clause in a credit card contract that speaks to morality or ethics. There are bad people who have credit cards and pay them on time.
There are also good people who can’t make their payments on time.
This is, after all, a business deal. There’s a contract, and everyone agrees to be bound by whatever it says.
If you pay back the money according to the terms of the agreement then the lender makes a profit. You, in turn, get the benefit of being able to use the money for awhile.
Still, my clients can’t shake the feeling that bankruptcy is somehow dishonest. After all, don’t good people pay their bills?
When you take a closer look at the Bible it’s easier to see that bankruptcy is acceptable
What Does the Bible Say About Bankruptcy?
Most bankruptcy lawyers can rattle off a bunch of verses about how the Bible looks at bankruptcy.
Deuteronomy 15:1-2 talks about the Lord’s Release, and how every seven years each creditor shall release what he has lent to his neighbor. In Luke 7:42, the Bible says, “When they were unable to repay, he graciously forgave them both. So which of them will love him more?”
And Romans 13:8 says, “Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.”
Bankruptcy, in other words, isn’t terrible when viewed in a vacuum. Nobody is a sinner because they walk into bankruptcy court.
Still, the question remains – aren’t people told to pay their debts?
The Bible Doesn’t Like Debt
The Bible makes it clear that there is no such thing as good debt and bad debt – it’s all bad debt.
Proverbs 22:7 says, “The rich rules over the poor, And the borrower becomes the lender’s slave.” It continues in Proverbs 22:26-27 by telling us, “Do not be among those who give pledges, Among those who become guarantors for debts. If you have nothing with which to pay, Why should he take your bed from under you?”
To help you stay out of debt, 1 Corinthians 16:2 instructs you to put away money for a rainy say. “On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come,” it says.
If You Go Into Debt, Be Honest
We teach our children from an early age that honesty is the best policy. Don’t lie, don’t cheat, and don’t steal. The Bible reinforces those moral absolutes.
Psalms 37:21 makes clear that wicked people incur debt with no intention of paying it back. And Ecclesiastes 5:5 says, “Better you should not vow, than vow and not pay.”
But both of these sentiments speak to someone who makes a promise and then willingly breaks it. As in the modern world, the Bible is clear that bad people make promises with no intention of keeping them.
As in our day-to-day lives, it isn’t the failure to live up to an obligation that causes the problem. It’s the deceit involved in having no intention to do so at the outset.
But what about someone who can’t pay debts because of circumstances beyond his or her control?
If You Can’t Pay, The Bible Encourages Mercy
When you want to pay your debts but aren’t able to do so, the Bible instructs your creditors to show mercy.
Beyond the Lord’s release, the Bible is clear that forgiveness is the right thing to do. Matthew 18:27 talks about the master who forgave his slave’s debt when he could not repay. Luke 7:41-42 tells of the moneylender who forgave two debtors unable to make payments.
These stories show that the Bible encourages creditors to show forgiveness.
Creditors Also Bear Responsibility
People hire me to file for bankruptcy when creditors refuse to work with them. Rather than lower payments or interest, creditors add fees and send them to collection.
Isn’t it wrong to charge 19.99% interest on a credit card?
Leviticus 25:35-37says, “If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”
And Exodus 22:25 directs, “If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.”
Deuteronomy 23:19-20 says, “You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.”
People who are in the business of lending money need to make money, and charging interest is how they do it. But there’s a difference between a reasonable rate of return and what you see on the typical credit card agreement.
It’s All About Honesty and Fair Dealing
I’ve spent 20 years working with people who were over their heads in debt. They come to me because they have no reasonable way of paying it off.
My religious clients turn to me for financial guidance. When I suggest bankruptcy, they talk about morality and whether bankruptcy is dishonest.
Here’s what I tell them.
There’s a moral obligation to repay debts when you can, and to only incur debt you intend to repay.
People who lend money also have a moral obligation, and that is to be fair.
But banks aren’t people, and the credit card agreements aren’t fair. The lenders stack the deck against you by charging high interest rates and fees. They make it worse by refusing to work with you when you need help.
The system is good for profits, but not moral or ethical.
Bankruptcy is the law’s attempt to balance the scales and make the system fair. The law can’t legislate morality, but it does the next best thing by enforcing fairness.
Filing for bankruptcy isn’t easy, and it’s not always quick. Sometimes you lose a little money, a little property, or a great credit score for a few months.
But make no mistake – there’s nothing immoral, sinful, wicked, or evil about filing for bankruptcy.