Bankruptcy can be a controversial topic among Christians. Some people think bankruptcy is a cop-out, a way for people to outrun their outrageous spending habits. Others see bankruptcy as the ultimate act of forgiveness, a chance for people to start over with a “clean slate.” And some think that we should only make such judgments on a case-by-case basis—it’s the heart of the bankrupt person that matters.
But how should Christians think about Bankruptcy? What exactly does bankruptcy accomplish? And what does the Bible have to say about such things as debt forgiveness, loans, and credit?
The Bible has a lot to say about the principles behind bankruptcy law. In the Old Testament, God gave Moses various laws concerning the poor, lenders, borrowers, and debt forgiveness. Here are some of the most notable:
“If your brother, a Hebrew man or Hebrew woman, sells himself to you, he shall serve you six years, and in the seventh year you shall let him go free from you. And when you let him go free from you, you shall not let him go empty-handed…As the Lord your God has blessed you, you shall give to him.” Deut. 15:12-14.
“The land shall not be sold in perpetuity, for the land is mine. For you are strangers and sojourners with me. And in all the country you possess, you shall allow a redemption of the land.” Lev. 25:23-24.
“But if he has not sufficient means to recover [the land], then what he sold shall remain in the hand of the buyer until the year of jubilee. In the jubilee it shall be released, and he shall return to his property.” Lev. 25:28
“If your brother becomes poor beside you and sells himself to you, you shall not make him serve as a slave: he shall be with you as a hired servant and as a sojourner. He shall serve with you until the year of jubilee. Then he shall go out from you, he and his children with him, and go back to his own clan and return to the possession of his fathers.” Lev. 25:39-41.
From these passages, we get a glimpse of how God makes provision for people who cannot pay their debt after a certain number of years. Beside discouraging lenders from making “bad” loans (ones that could not be repaid in seven years), the law prevented overwhelming debt from ruining a person’s life forever. In this way, God’s law provided for a type of bankruptcy protection every seven years (and every 50 years for land).
The United States bankruptcy scheme is complex, but the similarities between it and the biblical system are striking. Both systems served to protect the relatively powerless consumers and give predictability and stability to the creditors. For example, in the Israelite law, debtors could be released from their debts every seven years—no matter the amount of the debt, it was gone. This prevented common debtors from having to sell themselves into slavery in perpetuity to pay for their debts. On the other hand, it gave a stable and predictable risk profile to creditors seeking repayment of those debts. Lenders could temper their desire to make risky loans with the knowledge that any chance of repayment after the seventh year was uncertain.
In a similar way, the Bankruptcy Code allows a person freedom from their debt every eight years. Chapter 7 of the Bankruptcy Code governs (in large part) individual debtors and the discharge of a person’s debt. If someone has received a discharge of their debt under Chapter 7, they must wait eight years before they can file for bankruptcy again. This echoes the biblical pattern of debt being wiped away every seven years. (But whether this tempers creditors’ risky lending practices is another question).
In addition, under the biblical law, people who sold themselves into slavery to pay for their debts were released in the seventh year. But they weren’t released into poverty and destitution—the master was not allowed to let the servant go away “empty-handed.” Instead, masters were told to bless their servants upon their release, because God had blessed them. This allowed servants—just released from the bondage of their debts—to restart their life on solid footing.
The Bankruptcy Code allows for something similar in principle, although not identical in practice. It’s called the “homestead exemption.” The homestead exemption prevents unsecured creditors from taking certain property from debtors, no matter how much money they owe. In Texas, the exemption applies to the debtor’s land (up to 200 acres in rural areas) and up to $60,000 in personal property for a family. These exemptions allow debtors to retain the necessities that will help them to re-start their life on solid footing—they won’t walk away from bankruptcy “empty-handed.” (Note: the homestead exemption does not apply to property secured by a mortgage, lien, etc.).
The United States Bankruptcy Code is complicated, and—to the jaded mind—it may be too easy sometimes to let people “off the hook” for their debts. But its roots are planted firmly in Scripture and in God’s character. So as we think about Bankruptcy (and the borrowing/lending cycle that prompts it) let’s remember that forgiveness of debt is part of God’s gracious character, which we as individuals (and as a society) are called to reflect. After all, it was our own infinite debt that was forgiven on the cross.
Kyle Bryant is an attorney (and urban design enthusiast) with Bryant Law in Houston, Texas. His practice focuses on civil litigation and family law issues. He is also an active member at Sojourn Heights Church in The Heights neighborhood of Houston. He can be reached at firstname.lastname@example.org