Lancaster Bankrupty, Religion, and the Bible – Is Filing Bankruptcy Moral?

Mayor R. Rex Parris of Lancaster, CA recently declared that in the Antelope Valley, “We’re growing a Christian community, and don’t let anybody shy away from that.” The remarks stirred controversy with Antelope Valley Muslims and became a rather large news story.  Mayor Rex has since apologized, but not before provoking a thought in me about bankruptcy, religion, the bible and morality and its significance to the encompassing religious and non-religious community in Lancaster.

I generally view bankruptcy as a very pragmatic legal solution to a particular set of financial problems, but it is certainly fair to ask what moral significance there is to discharging or restructuring your debt through the bankruptcy process.

Bankruptcy serves a valuable and moral purpose and I don’t need a theological lens to understand that for myself.  I have found most people to be responsible with an earnest desire to payback their debts.  I have also been well acquainted with the point at which painfully difficult economic and financial circumstance cripples an individual or family to the point of servitude or worse.  While bankruptcy should not be taken lightly, the fundamentally moral significance of forgiveness is undeniable.

In addressing the Morality of Debt Forgiveness, Jack F. Williams weighs the moral arguments as follows:

Moral Responsibility of the Debtor

1. A debt is a contract and a contract is a promise. We should keep our promises.
2. It is an independent good to live within one’s means.
3. One should be responsible for one’s actions, including taking on debt that cannot be paid back.
4. Bad things happen to good people; people are fired, get hurt, get sick, and lose income and with it, the ability to repay debt.
5. A legal discharge is not congruous with a moral absolution.

Moral Responsibility of the Creditor

1. It is wrong to entice one to take on too much debt.
2. It is wrong to be dishonest in advertising.
3. It is wrong not to police your potential lender base.
4. It is wrong to harass your debtor.
5. It is good, very good, to forgive a debt owed by someone who does not have the ability to pay.

There are many viewpoints some with a much more theological bent.  The absolute best I have been able to find regarding a biblical underpinning supporting the morality and bankruptcy is an article entitled Forgive us our Debts as We Forgive our Debtors: Bankruptcy and the Bible by attorney O. Max Gardner.  It is a worth your time to read for anybody ascribing either to the New Testament, Old Testament, or both.

While the article makes a clear case that one is expected to pay their debts, Deuteronomy 15:1-2 provides that every seven years,  “Every creditor shall release what he has lent to his neighbor, his brother, because the Lord’s release has been proclaimed.”

Interestingly, the name Chapter 7 bankruptcy echoes the seven in Deuteronomy and if we reach back to the Bankruptcy Act of 1938, Chapter 7′s could be filed you guessed it, every seven years.  That has since changed to eight years and Deuteronomy does not approve.

The Bible also quite explicitly forbids the charging of interest and orthodox Jews must sign a special religious document called a Heter Iska to get around what would appear to be an unambiguous condemnation in Exodus 22:25; Leviticus 25:35; and Deuteronomy 23:19-20 to name only a few.

Without judging Mayor Rex’s remarks, but understanding the strength of the Christian community in Lancaster generally, I would hope the Christian community in Lancaster could take heart in the fact that there is nothing inherently morally inconsistent with filing bankruptcy especially when our community continues to be hobbled by the bursting housing bubble and recession.

Equally important to me however is that regardless of your philosophical and/or religious beliefs and whether you be atheist, agnostic, Jewish, Christian, or something else that you understand that there is indeed a strong, broad-based, even universal moral footing for bankruptcy.  I would like to explicitly include Muslims in my assessment, but admittedly I don’t know enough about the Qur’an to offer any insights although I would be greatly surprised if their wasn’t as Islamic analog.

For the sake of full disclosure, not all Christians agree in their assessment of the morality of bankruptcy.  One article from the Christian Science Monitor in an article about the Moral Burden of Bankruptcy contains some harsher views including reflections on the oft cited Psalm 37:21.

It is good to keep your promises and honor your debts, but sincere individuals like you deserve forgiveness too.  It is my goal as a compassionate human being and bankruptcy attorney to see that you have it.