The Bible and Bankruptcy

Biblical Connection to the Modern Bankruptcy Code

Many approach their lives and how they conduct themselves from a perspective placing primary importance on faith, trust, and obedience to God. As such, when contemplating bankruptcy, where contracted promises to pay one’s unsecured creditors become unenforceable and are no longer honored, and where one’s personal faith in God may at times seem in conflict with the legal remedies available to a struggling debtor, many are hesitant to file bankruptcy.

The U.S. Bankruptcy Code including its subsequent changes, was designed to provide U.S. consumers relief from seemingly insurmountable debt. Many are unaware, however, that the bankruptcy code and a number of its constituent elements, were in part conceived around Old Testament or Torah concepts found in the Bible. In fact Christian or Jewish adherents to the Old Testament might recall God ordering the release of debtors from their obligations every seven years.

The Christian Bible and the Jewish Torah in the Book of Deuteronomy 15:1-2, state this divine proclamation of periodic release from debt in the following way:

1At the end of every seven years thou shalt make a release. 2And this is the manner of the release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the LORD’s release.

We find also in the Book of Nehemiah 10:31, reference to the standard practice of periodic debt forgiveness in biblical Jewish culture:

…and that we would leave the seventh year, and the exaction of every debt.

Modern considerations toward exempting a worker’s “tools of the trade” from taking in the bankruptcy process, among other examples, are also present in the Bible:

No man shall take the mill or the upper millstone to pledge: for he taketh a man’s life to pledge.”Deuteronomy 24:6.