Law Offices of Nicholas Gebelt

The Morality of Bankruptcy

Is Bankruptcy Morally Wrong?

Many good, decent, and law-abiding people find themselves financially in over their heads in debt, perhaps due to job loss, medical catastrophe, or some other reason. They consider bankruptcy only as a last resort, and are afraid that filing for bankruptcy means they are committing some sort of sin.

What The Bible Teaches About Bankruptcy

It may help to learn that the Bible actually provides for a type of bankruptcy once every seven years. In the Old Testament book of Deuteronomy we read:

At the end of every seven years thou shalt make a release. And this is the manner of the release: Every creditor that lendeth aught unto his neighbor shall release it; he shall not exact it of his neighbor, or of his brother; because it is called the Lord’s release. (Deuteronomy 15:1-2 (King James Version)).

Thus, creditors in ancient Israel were required by law to forgive their debtors every seven years. And, of course, the New Testament is replete with commands to forgive. For example, in the Sermon on the Mount, Jesus commanded the inclusion in prayer of the statement: “And forgive us our debts, as we forgive our debtors.” (Matthew 6:12 (King James Version)).

The Foundation Of United States Bankruptcy Law

When the United States Constitution was drafted, its framers apparently felt that this biblical bankruptcy principle had a place in our new nation because they explicitly gave Congress the power:

“To establish … uniform rules on the subject of bankruptcies throughout the United States …” (U.S. Constitution, Article I, Section 8, clause 4).

The modern Bankruptcy Code (Title 11 of the United States Code) is the result of Congress’s exercise of this constitutional authority. (Note: The various types of bankruptcy, such as Chapter 7Chapter 13, etc., are so-called because of the corresponding chapters in the Bankruptcy Code where they are discussed.) Whatever their personal failings may have been, the framers of the Constitution certainly would not have included bankruptcy law in the Constitution if they had thought that there was anything immoral about the practice. Instead, they understood the idea of forgiveness as a way to give debtors a fresh start so that they could become productive members of society again.

Thus, neither the biblical author of Deuteronomy, nor Jesus, nor the founders of the United States, taught that bankruptcy was an immoral practice that should not be permitted. Indeed, the Deuteronomy law REQUIRED creditors to forgive debtors, just as United States bankruptcy law requires creditors to forgive debtors in bankruptcy.

Ultimately, you will have to decide for yourself whether bankruptcy is morally acceptable for you. The thoughts expressed above are provided to help you reach that decision.

Attorney Nicholas Gebelt

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