Guilt. Feelings of doing something against core beliefs. These and other reservations sometimes come up in thinking about filing bankruptcy. Is it ethical? Is it moral?
Let’s start here: bankruptcy concepts are firmly embedded in the Bible:
“At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor. He shall not exact it of his neighbor, his brother, because the Lord’s release has been proclaimed.”
Before Congress passed massive changes to the U.S. Bankruptcy Code in 2005, after a chapter 7 filing one could file another chapter 7 petition seven years later. The 2005 law changed that to eight years.
Bankruptcy also exists in the foundation of the United States Constitution, which instructed Congress to enact:
“uniform Laws on the subject of Bankruptcies throughout the United States.”
U.S. Constitution – Article 1, Section 8, Clause 4
The bankruptcy reference sits directly in the text of Article 1 of the Constitution. It wasn’t delayed to the later drafting of the Bill of Rights, which gives us such things as freedom of religion and speech.
I’m not a theologian and don’t pretend to be one. But, most if not all of the world’s major religions allow bankruptcy conceptually. Bankruptcy exists in The Holy Koran, which permits bankruptcy under a concept called Iflas. This is discussed at length in a 2010 Pace University publication. So, bankruptcy is not unique to the Western world.
Having roots in the Bible and the U.S. Constitution is enough for me.
But, keep in perspective that major credit card companies charge up to 34.99% interest. Some even moved their posh headquarters out of New York to places like South Dakota, Nevada and Delaware to legally extract such exorbitant rates. Not that long ago such interest rates were called “usury”. That’s a Biblical term defined as charging excessive, unreasonably high and often illegal interest rates.