Is Filing Bankruptcy Immoral or a Sin?

Is it a sin to file bankruptcy?

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Most Americans identify with some sort of religious belief or church. With religion comes a doctrine, usually in the form of a book that guides that religion. Within that book are guidelines on behavior, salvation and sin. For those that are religious, you may wonder if filing bankruptcy to get out of debt would be considered a sin. Today, we’ll take a look at what the doctrines of some major religions have to say about debt and debt forgiveness.

Which religions are most prolific in the US?

According to the Pew Research Center, roughly 70% of Americans identify as Christians with the three primary subdivisions as:

• Evangelical Protestant - 25.4% 
• Catholic - 20.8% 
• Mainline Protestant – 14.7% 

Among non-Christian faiths, nearly 2% of the US population identifies as Jewish and about 1% as Muslim followed by .7% each for Buddhist and Hindu. For today’s conversation, we will consider the top three US faiths by the numbers: Christianity, Judaism, and Islam.

What does Christian doctrine say about debt and bankruptcy?

Christian theology relies on both the New and Old Testament of the Bible as their source book – and both of these address debt and debt forgiveness. Here’s a look at some scriptural references on the subject:

• Deuteronomy 15:1-2 At the end of every seven years you to a fellow Israelite. They shall not require payment from anyone among their own people, must cancel debts.  This is how it is to be done: Every creditor shall cancel any loan they have made because the Lord’s time for canceling debts has been proclaimed.
• Exodus 21:2 If you buy a Hebrew servant, he is to serve you for six years. But in the seventh year, he shall go free, without paying anything.
• Matthew 6:12 And forgive us our debts, as we also have forgiven our debtors.

In fact, the seven-year forgiveness in Deuteronomy is the foundation for part of US bankruptcy laws. Debtors can file for Chapter 7 bankruptcy every seven years. The initial Bankruptcy Act of 1938 based this timing on the Biblical reference to debt relief. Debt forgiveness is a recurring theme in the Bible and, in fact, creditors are encouraged to relieve debt and not charge excessive interest (usury).

What does Jewish theology say about debt and bankruptcy?

Both and Exodus and Deuteronomy are Old Testament books and so are relevant to the Jewish faith. The Jewish faith has two main doctrinal resources – the Torah and the Talmud. The Torah is the first five books of the Old Testament including Genesis, Exodus, Leviticus, Numbers and Deuteronomy. The Talmud is a tome of civil and ceremonial law. Because this is a complex issue that covers a breadth of doctrine, we turn to Rabbi, attorney and Professor of Law, Steven Resnicoff for his expert opinion.

Professor Resnicoff authored an article “A Jewish Law Perspective on the Propriety of Discharging Personal Debts.” In this piece, he writes that “the Torah did not call for an American-style bankruptcy discharge” and adds “a number of Talmudic sources make it clear that even if debt cancellation applied to a debt, one is strongly urged to pay it.” With this in mind, though, Resnicoff concludes that “Jewish law [would probably] recognize the validity of an American bankruptcy law discharge.”

What does Islam say about debt and bankruptcy?

The Qur’an (sometimes spelled as Koran) is the primary book of Islamic faith and it is decidedly anti-interest in many sections. Some relevant thoughts on interest from the Qur'an and other Islamic doctrine include:

• Allah's Messenger cursed the accepter of interest and its payer, and one who records it, and the two witnesses.
• A dirham of Riba (interest) knowingly taken by a man is a sin worse than committing Zina (fornication) 36 times.
• If the debtor is in a difficult situation, let there be a postponement until easier times and he is able to repay, and if you were to forgive the debt, it would be better for you.

Also in sources of Islamic law, the Sunna (tradition) of the Prophet (pbuh) shares stories of forgiving half the debt of a debtor who is in distress.

What's the bottom line on the morality of debt relief?

No matter your personal faith, bankruptcy is a solution available to you under US law. It’s up to you to reconcile legal debt relief with your religious tenets. If you are concerned about the morality of your decision to file bankruptcy, you may want to consult your pastor, Rabbi or Imam, or other spiritual advisor to discuss your debt circumstances.

If you’re deep in debt and don’t know where to turn, contact the Law Offices of John T. Orcutt to find out more about the benefits of bankruptcy. Call (+1-833-627-0115code) for a free North Carolina bankruptcy consultation at one of our offices in Raleigh, Durham, Fayetteville, Wilson, Greensboro or Wilmington.

Sources:

Pew Research on Religion in America

Professor Resnicoff’s Article

Islamic Finance