I am often asked by Christians if it’s wrong or immoral to declare bankruptcy. After all, the Bible says we should pay our debts.
This is what I tell them:
First, I automatically tell them that bankruptcy is not a sin, and they are not going to go to Hell for filing bankruptcy. It’s not a salvation issue.
Once that has been established, I think it’s important to address some of the reasons why bankruptcy is rarely a good idea.
Thoughts Can Easily Turn to Bankruptcy
Most households in America have at least a little debt. However, some have so much debt they believe that it’s impossible to overcome their situation. When hopelessness sets in, it’s easy to start seriously considering bankruptcy.
Whether you got into debt from huge medical bills from an illness or injury, or you just took your eyes off the ball and spent more than you made for years on end, when you believe you’re in a desperate financial situation, bankruptcy can seem like a simple solution to a difficult problem.
It becomes easy to seek advice from bankruptcy attorneys and other professionals that have a vested interest in you using their services, and may not have your best interests at heart.
Before you seriously consider bankruptcy, let’s take a close look at a few things you should consider before going down that road.
Bankruptcy- What Does The Bible Say?
The Bible doesn’t directly address bankruptcy specifically. However, it does talk about failing to pay back debt.
Two examples are Psalms 37:21:
“The wicked borrows and doesn’t pay back, the righteous is gracious and gives”
and Ecclesiastes 5:5:
“Better you should not vow, than vow and not pay.”
There are several other verses that reflect those same thoughts as well.
So to put it plainly, God isn’t too thrilled with the situation when you don’t pay off your debts. If you’re a Christian, obviously you would want to be in good standing with God (Life is MUCH easier when you are).
Pray About It
So if you’ve found yourself in a severe financial bind, start lifting that situation up to God. Pray for His direction and favor over your situation. That doesn’t mean He’s going to drop a million dollars out of the sky to pay off your debt, but He can start showing you ways of dealing with it that you may not have thought of or believed possible.
Give it up to Him and let Him lead the way.
When you trust Him to guide you through your situation it will catch His attention. Doing things your way and living in desperation may be part of how you got deep into debt in the first place. Giving it over to Him will definitely bring favor where there was none before.
He can make a way for you where there is no way, and He will always bless you for doing the right thing.
Get Educated About Debt
Study what the Bible has to say about debt and how to handle your finances (I’ve listed a few verses at the bottom of the post to get you started).
You should also read books and even take courses about how to get out of debt and use money wisely. I recommend “Financial Peace” and “The Total Money Makeover” by Dave Ramsey, among others. The more educated you become about your money, the smarter decisions you tend to make.
Seek Out Wise Advice About Your Debt
Notice I wrote “people”.
In a multitude of counselors there is wisdom.
Getting financial advice from someone who has a vested interest in profiting from your situation is not always wise. They tend to look at your situation through the lens of what they do for a living, and usually recommend ways to use their services instead of what may be best for you.
Find people you know that handle their money well, preferably someone who’s out of debt, and ask their advice. Many churches, especially larger ones, sometimes have financial counselors available on staff that can help lead you in the right direction.
Bankruptcy May Not Solve The Real Problem
Working your way out of a tough financial situation takes time, effort, patience, and most of all, changes in behavior.
When you declare bankruptcy, there is nothing in that process that changes the habits that got you there in the first place. However, when you learn to budget, find ways to create extra income, and do everything you possibly can to overcome your debt, it causes you to learn new patterns of behavior that will move you forward and ensure that you NEVER dig that hole again.
Bankruptcy Is a Last Resort
Bankruptcy can be an extremely emotional process. Studies have shown that it can be equivalent to going through a divorce or the death of a loved one. It’s truly a last resort financially.
In my opinion, bankruptcy is necessary only a very small percentage of the time. But if you are a believer and you do decide to go down that road, remember to trust your creator. Remember that He is a loving and forgiving God no matter what you do.
He will see you through any situation no matter how bleak, giving you a hope and a future as long as you put your trust and belief in Him.
Recommended verses: Proverbs 21:12, Proverbs 22:7, Proverbs27:23, Psalm 20:4, Proverbs 22:26-27
The idea that this is even a question astounds me. Yes, bankruptcy shouldn’t be taken lightly. It shouldn’t be where you can just yell “Safe!” like in the kids’ game tag. If you can feasibly work it out, then do. If you cannot make the numbers work, if the debt is threatening your well-being — as in the ability to afford shelter, food, wearable clothes — then you’ve tried your best to fulfill your duties.
I’m not a Christian, but I can’t imagine God looking down on someone who has tried his hardest and admitted his shortcomings. (I hear He’s not too fond of hubris, after all.) Especially if that person then changes his life to avoid the situation and be a better person (financial or otherwise) in the future.
You’re right, God rewards those who help themselves, even if they have made a mistake. They still have to suffer the consequences of their actions, but when you show Him that you have a change of heart and do something correct those actions, He’ll be more likely to see that things fall your way.
This is well-written, well-referenced, and very thoughtful. Thank you for that.
To start, I almost completely agree — not only is not paying a debt a broken promise and akin to lying, it’ll be a bad for society when we can’t trust each other enough to believe the contracts we’re signing with others.
But I think there’s something that’s missing in this discussion — family.
I’ve spoken with more than a few people who moved into modest homes, had good jobs in what were secure, dependable industries, and lived humble lives. Then, as the housing market unraveled in 2008, they watched as not just their industry, but the entire job market in the region dried up. Meanwhile, their home value, which had been over-inflated through no fault of theirs sunk well below what they owed meaning they couldn’t leave the region if they wanted to. At the same time, as property taxes dried up and all their neighbors were facing similar financial struggles, the once-average local schools became terrible.
As a single man, if this were me, I could get by taking odd jobs outside my industry, taking in roommates, cutting my expenses down to nothing, and accepting any consulting work offered me until either housing prices recovered or I paid off enough of the balance to leave town.
But if I had a family? Working that many jobs would mean that my wife and I would get to spend very little time with each other and with our kids. And letting those kids stay in a poor performing school could severely handicap their future or worse.
I’m certainly not saying that a family couldn’t make it through this situation and succeed, nor am I saying that bankruptcy — technically in this case, strategic default — would be the right answer every time, but I think there is much to be said for balancing between doing what’s right and what’s right for your family.
All good points Mario. That’s why I teach people to stay out debt as much as possible, have an emergency fund, and spend less than you make. When you follow these basic principles you are MUCH less likely to end up in a bad situation when times get tough. It always pays to assume the worst will happen at some point and be prepared for it.
Jason, thank you for this article. The fact that it points the bankruptcy decision maker to seek God on the matter is wonderful. As a Christian who did file bankruptcy after 2 rounds with Dave Ramsey, Good Sense and a bunch of personal finance books and blogs, it is a heart wrenching decision. It tested my faith because I believed if we did everything right (tithed, learned how to handle our finances, took extra work, cut every imaginable expense, etc) that God would save us from it. Financial “manna” would rain down from Heaven and we’d be spared. It did not happen. If this is you, be encouraged. Bankruptcy was a gift. And if you look at God’s heart, His desire has always been Freedom for captives. I can’t say it enough – If you are struggling financially pray and pray again and Trust Him. Thank you Abigail for bring Grace into the conversation. We all need it.
thank you. I have never even thought of filing for bankruptcy, but over three years ago I signed for my grandson to buy a car, big mistake. He didn’t make the payment, and returned the car to the dealer. After that I’ve had calls, letters from lawyers and collection agency, non-stop. I can’t pay the loan off, my income is 496.00 a month. I have always paid my bills on time, and had good credit.
I am a Christian elderly woman, I’ve been praying. I’m trying to turn this matter over to God, sometimes it hard for me to do that. After reading what you said, I will continue to pray, as I truly don’t want to file for bankruptcy.