Q: Is it wrong or unbiblical to declare bankruptcy?


A: We should realize that members over the years, in following Church teaching, have declared bankruptcy. Bankruptcy is a recognized and legal means in this world to free oneself from debts, under certain circumstances. Court decisions have been rendered, involving Church members, dealing with questions regarding tithes and offerings in bankruptcy procedures. Certain state laws allow churches to keep tithes, up to a certain amount and percentage, which were received from members who subsequently filed for bankruptcy.

More importantly, the Bible endorses the concept of declaring bankruptcy in certain circumstances. What is the biblical basis for the Church’s long-standing teaching that the declaration of bankruptcy is not against Scripture, under certain circumstances?

We have always taught that bankruptcy is not to be taken lightly, but that it is a very serious matter. Normally, a person should do everything he or she can to pay back any debts incurred by him (2 Kings 4:7), or to at least try to arrange an extension of time with the creditors. There are unforeseen circumstances, however, which justify and sometimes even necessitate the declaration of bankruptcy. These circumstances might involve debts incurred in a business transaction, inherited debts, unexpected debts, or even incorrect allegations, falsely claiming that debts are due and owing, leading to a lawsuit by the “creditor” against the “debtor,” against which the “debtor” has no financial means to defend him- or herself.

If a debtor finds him- or herself in such a situation, he or she is Scripturally allowed to file for bankruptcy in order to reorganize his or her debts or, failing this, to extinguish his or her debts. There are numerous Biblical passages which, judging by their spiritual implications, allow for the same.

These passages deal with God’s institution for ancient Israel of the “Sabbath” and the “Jubilee” Year.

(1) On the “Sabbath Year,” that is, at the end of every seventh year, “debts of fellow Jews [correctly: Israelites] were to be canceled” (Halley’s Bible Handbook, 24th ed., p. 139). One needs to note that this was an automatic release of debt, by God-given law. It was not required that an agreement was reached between creditor and debtor, or that the creditor agreed to release the debt of the debtor. Quite to the contrary, the debts had to be released every seventh year, whether the creditor liked it or not. This was not just a postponement of debts, either; it was, rather, a cancellation of debts.

Notice Deuteronomy 15:1-3, 9: “At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor SHALL RELEASE IT; HE SHALL NOT REQUIRE IT OF HIS NEIGHBOR OR HIS BROTHER, because it is called the Lord’s release. Of a foreigner you may require it; but you SHALL GIVE UP YOUR CLAIM TO WHAT IS OWED TO YOUR BROTHER… Beware lest there be a wicked thought in your heart, saying, ‘The seventh year, the year of release, is at hand,’ and your eye will be evil against your poor brother and you give him nothing [knowing that by the time of the seventh year, the lender or creditor would never receive back what he gave] and he cry out to the Lord against you, and it become sin to

References to the Sabbath Year can also be found in Exodus 21:2, Nehemiah 10:31, and in Jeremiah 34:14. The release of debt was to occur automatically, without the necessity of an agreement between creditor and debtor. An interesting application of these principles can be found in Nehemiah 5:1-13.

(2) In addition, every fiftieth year, God’s civil law for ancient Israel demanded that ANOTHER release be granted. This was, again, not a matter of choice or agreement between creditor and debtor, but automatic. Halley points out on p. 139: “Jubilee Year was every 50th year. It followed the 7th Sabbatic Year, making two rest years come together. It began on the Day of Atonement. ALL DEBTS WERE CANCELED, slaves set free, and lands that had been sold returned.”

The Year of Jubilee is mentioned in several places, for instance in Leviticus 25 and Numbers 36:4. It is associated with the proclamation of “liberty” (Leviticus 25:10) and referred to as the “Year of Liberty” in Ezekiel 46:17. In Leviticus 25:24, 28, 39-41, it is stated:

“And in all the land of your possession you shall grant redemption of the land… But if he is not able to have it restored to himself, then what was sold shall remain in the hand of him who bought it until the Year of Jubilee, and in the Jubilee it shall be RELEASED, and he shall return to his possession… And if one of your brethren who dwells by you becomes poor, and sells himself to you…, [he] shall serve you until the Year of Jubilee. And then he shall depart from you — he and his children with him — and shall return to his family. He shall return to the possession of his fathers.”

The New Testament does not abolish the principles set forth in these Scriptures. In fact, Jesus came to preach liberty, as expressed in the Year of Jubilee, at His first coming (Isaiah 61:1-3; Luke 4:17-21), applying it to total freedom of God’s people, including freedom from all sickness, disease, sin, death, and every curse (compare, for example, Edward Chumney, “The Seven Festivals of the Messiah,” p. 147). It is true that there are New Testament Scriptures describing how creditors freely forgave their debtors (compare, Luke 7:41-42; 16:5-8). These additional Scriptures do not negate the principle, however, that debts can be forgiven by law and in God’s sight, regardless of whether the creditor is agreeable to such cancellation or not. In conclusion, the concept of declaring bankruptcy is Biblical under certain circumstances.

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