What Does the Bible Say About Bankruptcies?

While “bankruptcy” as a modern legal process did not exist in biblical times, the Bible offers extensive guidance on financial stewardship, debt, and economic hardship. Its teachings provide a framework for understanding and navigating financial distress. This article explores biblical perspectives on managing resources, debt, and financial relief, drawing wisdom from scriptural texts to inform approaches to financial challenges.

Biblical Principles on Debt and Lending

Scripture often advises caution regarding debt, highlighting its potential to create dependency. Proverbs 22:7 states that “the borrower is servant to the lender,” indicating a loss of financial autonomy when one is indebted. This perspective encourages individuals to strive for financial independence and avoid unnecessary borrowing. The Bible also outlines responsibilities for both parties in a lending agreement.

Lenders are admonished against charging excessive interest or exploiting those in need. Deuteronomy 23:19-20 prohibits charging interest to fellow Israelites, and Exodus 22:25 instructs against burdening the poor with interest. These passages reflect a concern for the vulnerable and emphasize compassion in financial dealings. Borrowers are expected to fulfill their obligations, as Psalm 37:21 notes that “the wicked borrows and does not pay back.”

Wisdom literature, such as Proverbs 6:1-5, strongly cautions against providing surety or cosigning for another’s debt. This practice, where one pledges assets or assumes liability for another’s loan, is a risky endeavor that can lead to personal financial ruin. The advice is to quickly free oneself from such agreements, underscoring the dangers of taking on financial responsibility for others. These principles highlight the moral and practical implications of debt, advocating for careful financial management and ethical lending practices.

Concepts of Debt Forgiveness and Release

The Old Testament introduces concepts of debt forgiveness and economic resets, most notably through the Sabbatical Year (Shemitah) and the Year of Jubilee. These practices provided structured mechanisms for financial relief and economic restoration. The Sabbatical Year, occurring every seventh year, mandated the cancellation of debts owed by one Israelite to another, as detailed in Deuteronomy 15:1-11. This provision ensured individuals were not perpetually burdened by debt, offering a fresh financial start.

In addition to debt cancellation, the Sabbatical Year also involved the release of indentured servants who had sold themselves into service due to poverty. This practice prevented long-term servitude and upheld individual dignity. The Year of Jubilee, observed every fifty years, was a comprehensive economic reset, as described in Leviticus 25:8-55. During this year, debts were cancelled, servants freed, and ancestral lands sold due to financial hardship were returned to their original families.

These periods served as profound expressions of social justice and theological principles. They prevented the concentration of wealth and land, ensuring economic disparities did not become permanent. The underlying reasons included God’s provision and a commitment to preventing perpetual poverty within the community. These biblical mandates provided an approach to financial relief, emphasizing cyclical restoration and equitable distribution of resources.

Compassion for the Indebted and Poor

Beyond structured debt forgiveness, the Bible consistently emphasizes compassion and generosity towards those facing financial distress. Laws and teachings throughout scripture command care for the vulnerable, including the poor and indebted. For instance, gleaning laws in Leviticus 19:9-10 instructed landowners to leave some harvest in the fields for the poor and foreigners to gather. This ensured the disadvantaged had access to food.

Deuteronomy 15:7-8 directs individuals to “open your hand to your brother, to the needy and to the poor in your land.” This instruction encourages active support for those experiencing hardship. Scripture strongly condemns those who exploit the poor. Such actions are viewed as offenses against humanity and divine principles, underscoring the moral imperative to protect the economically disadvantaged.

The New Testament reinforces these themes, highlighting charity and mutual support within the community of believers. Acts 2:44-45 describes early Christians sharing possessions and distributing to anyone as they had need, reflecting a communal approach to alleviating financial burdens. 2 Corinthians 8:13-15 encourages believers to share their abundance to meet the needs of others, promoting equality and ensuring no one suffers undue hardship. These teachings underscore the community’s role and individual responsibility in providing relief and support to those experiencing financial difficulties.

Practical Financial Wisdom from Scripture

The Bible offers numerous practical financial principles to help individuals avoid severe hardship and promote economic well-being. Diligent work is consistently praised, as Proverbs 10:4 notes that “a slack hand causes poverty, but the hand of the diligent makes rich.” This emphasizes the importance of hard work in generating income. Wise stewardship of resources is a recurring theme, with Luke 16:10-12 teaching that faithfulness in managing small amounts leads to faithfulness with larger responsibilities.

Planning and saving for the future are encouraged. Proverbs 21:20 states that “precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.” This highlights the value of accumulating resources and foresight in financial matters. Contentment with one’s possessions is a significant principle, as Hebrews 13:5 advises, “Keep your life free from love of money, and be content with what you have.” This perspective discourages the endless pursuit of wealth, which can lead to debt.

Finally, the Bible warns against greed, which Luke 12:15 identifies as a source of many troubles, stating, “Take care, and be on your guard against all covetousness, for one’s life does not consist in the abundance of his possessions.” These principles provide guidance for proactive financial management, aiming to prevent situations that might lead to overwhelming debt or financial collapse. They offer a holistic approach to financial health, rooted in diligence, responsibility, and a balanced perspective on material wealth.