We all have to live through these tough economic times. States may have to file for bankruptcy in order to start fresh for the new year, but some states like Arkansas don’t have projected budget shortfalls but can choose to file for it. Bankruptcy refers to statutes and judicial proceedings involving persons or businesses that cannot pay their debts and seek the assistance of the court in getting a fresh start. Under the protection of the bankruptcy court, debtors may be released from or "discharged" from their debts, perhaps by paying a portion of each debt. Bankruptcy judges preside over these proceedings. The person with the debts is called the debtor and the people or companies to whom the debtor owes money are called creditors.
The Bankruptcy Code is an informal name for Title 11 of the United States Code (11 U.S.C. §§ 101-1330), which serves as the federal bankruptcy law. Currently there are several types of bankruptcies which are referred to by their respective chapters. All bankruptcies are filed in a federal court called the US Bankruptcy Court, which will supervise such cases to termination. For over a dozen years after the ratification of the Constitution, Congress failed to adopt a single bankruptcy law. It was not until April 4, 1800, that the Sixth Congress finally adopted our Nation’s first bankruptcy law, ch. 19, 2 Stat. 19, a law that left plenty of room for state law, § 61, id., at 36.
The first federal bankruptcy law was repealed by Congress just three years later. A decade later, the U.S. Supreme Court confirmed that the Bankruptcy Clause does not vest exclusive power in Congress, but instead leaves an important role for the States. It was not until 1841 that Congress enacted another bankruptcy law, ch. 9, 5 Stat. 440, and then repealed it less than two years later, ch. 82, id., at 614. The Civil War and the debts it caused led Congress to pass another bankruptcy law in 1867, ch. 176, 14 Stat. 517, but that was likewise repealed after just over a decade, ch. 160, 20 Stat. 99.
Although the Bible does not address bankruptcy per se, I do have some principles that might apply and therefore help us make some judgments.
Biblical principle #1. We have the responsibility to keep our promises and pay what we owe. Ecclesiastes 5:4-5 says, “When you make a vow to God, do not delay to pay it; For He has no pleasure in fools. Pay what you have vowed — Better not to vow than to vow and not pay."
Biblical principle #2. Living on credit and not paying back what we owe is characteristic of the wicked. Psalm 37:21 says, “The wicked borrows and does not repay, but the righteous shows mercy and gives.” We, as Christians and Americans, have no business behaving in the same manner as “the wicked.”
Is it proper for a American or a Christian in debt to get a “quick fix” to his problem by seeking bankruptcy? Based on these verses, the answer is “No.” Both a Christian and a American are obligated to pay what he has agreed to pay, under the original terms of the agreement. It may mean a change of lifestyle and a radical revision of the budget, but the good stewardship of money is a part of godly living.
There are certain types of bankruptcy which are designed to postpone repayment, rather than evade it. In such cases, the debt is not erased, and the one filing for bankruptcy communicates his intention of repaying the debt. Court protection is extended until one has the ability to repay. This type of bankruptcy would not violate the biblical principles discussed above and would be, for the individual Christian, a matter of conscience.
In order to prevent the federal government from bailing out states, would you support a federal law that forces a state to go through bankruptcy and renegotiate their government employee union contracts?
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