Bankruptcy Blog

The Bible and Bankruptcy

Too many in our society think of bankruptcy as a new-age idea designed in the 20th century. They feel it was designed recently, and believe its purpose is suspect. However, the roots of bankruptcy date back millennia! Just check out the references below…

1)     Bankruptcy in The Bible

The Bible itself outlines the ideals of bankruptcy.

                    A)   The Book of Deuteronomy 15:1-3 considers the societal benefits of forgiving                                 debts every 7 years:

            “At the end of every seven years you must cancel debts. 2 This is how it is to be done: Every creditor shall cancel any loan they have made to a fellow Israelite. They shall not require payment from anyone among their own people, because the Lord’s time for canceling debts has been proclaimed. 3 You may require payment from a foreigner, but you must cancel any debt your fellow Israelite owes you.”

My interpretation of this verse is that The Bible clearly anticipates the goodwill that comes from the periodical forgiveness of debt. It is healthy for society – both for the creditor and the debtor.

                     B)    Then in Matthew 18:21-35 in "The Parable of the Unmerciful Servant," The                                     Bible illustrates the duties of the creditor and debtor in debt forgiveness                                     situations:

“ 21 Then Peter came to Jesus and asked, ‘Lord, how many times shall I forgive my brother or sister who sins against me? Up to seven times?’

22 Jesus answered, ‘I tell you, not seven times, but seventy-seven times.[a]

23 ‘Therefore, the kingdom of heaven is like a king who wanted to settle accounts with his servants. 24 As he began the settlement, a man who owed him ten thousand bags of gold[b] was brought to him. 25 Since he was not able to pay, the master ordered that he and his wife and his children and all that he had be sold to repay the debt.

26 At this the servant fell on his knees before him. ‘Be patient with me,’ he begged, ‘and I will pay back everything.’ 27 The servant’s master took pity on him, canceled the debt and let him go.

28 But when that servant went out, he found one of his fellow servants who owed him a hundred silver coins.[c] He grabbed him and began to choke him. ‘Pay back what you owe me!’ he demanded.

29 His fellow servant fell to his knees and begged him, ‘Be patient with me, and I will pay it back.’

30 But he refused. Instead, he went off and had the man thrown into prison until he could pay the debt. 31 When the other servants saw what had happened, they were outraged and went and told their master everything that had happened.

32 Then the master called the servant in. ‘You wicked servant,’ he said, ‘I canceled all that debt of yours because you begged me to. 33 Shouldn’t you have had mercy on your fellow servant just as I had on you?’ 34 In anger his master handed him over to the jailers to be tortured, until he should pay back all he owed.

35 This is how my heavenly Father will treat each of you unless you forgive your brother or sister from your heart.”

The message in this passage is very straightforward. But the combination of the two above passages leaves some room for interpretation. The first clearly states it is virtuous to forgive debt, but the second passage seems to put an additional responsibility on the creditors’ manner of forgiveness, and a responsibility on the debtor post-forgiveness.

Matthew 18:21-35 is a parable, and thus should not be taken literally. So that allows us to consider our own interpretations. My thoughts on the 2 passages is that it’s a wonderful, healthy thing for society to forgive debts to the honest debtor who cannot repay in a reasonable amount of time. But it only has that positive impact if the forgiveness is genuine and unconditional by the creditor. And with this benefit bestowed upon the forgiven debtor, comes a responsibility. Matthew’s parable says that the Debtor shall also forgive, and not pursue his own debtors. My interpretation of Matthew’s parable takes the responsibility of the firgiven debtor even further: I think the forgiven debtor has a responsibility to not unreasonably fall back into debt. Not to be wasteful of the creditor’s forgiveness. Not to take for granted the benefit bestowed upon him. The affirmative responsibility to be grateful, and bestow the same unconditional forgiveness and goodwill on to the next neighbor.

Much of these ideas, not surprisingly, can summed up with the ultimate ideal: The Golden Rule, “Do unto others, as you would have done unto you.” This sort of reciprocity would set in motion a beautiful karma for society.

                      C) In line with The Bible, the American Bankruptcy system has been designed to                             give debtors a fresh start, just like The Bible had envisioned. In America, a                                   Debtor can file bankruptcy pursuant to the following time restrictions:

1)     2 years between chapter 13 filing dates.

2)     4 years if you previously filed a chapter 7, and are now attempting to find discharge relief in a chapter 13.

3)     6 years if you previously filed & completed a chapter 13, and are now attempting to file a chapter 7.

4)     8 years between filing dates for two chapter 7s.

There are some nuances involved, as there always are with the legal system, but these time limits are the basics.


The origins of Bankruptcy are rooted back millenia. And the system we have today in the United States, made available to us in the Constitution, mirrors the ideals outlined in The Bible itself. “The honest and unfortunate debtor” is allowed relief from his debts at least once every 8 years.

-Lucas Ruffing, Bankruptcy Attorney


Lucas Ruffing