Note to readers: In this issue we are omitting the page 4 “Indisputable Principles of a Committed Steward” – this segment will resume in November.
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Once the debtor has presented their case in an open and honest way to his, her, or their creditors, the creditors have two alternatives — they can agree to allow the borrower to pay what they are able on a regular monthly basis until the debt is settled, or they can force the individual into involuntary bankruptcy (an option of the creditor) and settle for whatever the debtor’s assets are worth. In the majority of cases the creditor will choose the first alternative as they are not in the business of losing money, even if they have to wait for the final settlement over an extended period of time. Sometimes a creditor will reduce or even eliminate the interest to help the debtor pay off his debt in a timely manner. One of the key factors for the creditor is if they perceive that an individual or family is not only committed to paying off the current debt but also to not acquiring any more debt.
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A potpourri of practical ideas to help you become a better steward
October 2005 Volume 10, Issue #10
Last Resort, or First, for a Christian?
by Gordon Botting
BANKRUPTCY!
Final Thoughts on Bankruptcy
Unfortunately both sides lose in bankruptcy. Creditors are deprived of the money that is rightfully theirs and debtors lose not only the ability to borrow legitimately on other assets for a number of years, but more importantly, they lose their self-esteem and respect. Furthermore, Christian men and women are obligated to repay every penny even if it means living “on porridge and bread.” 4 Finally, look to the God of financial miracles who may surprise you with a means of repayment. “Call on me in the time of trouble. I will deliver you, and you will bring honor to my name” (Psalm 50:15 TCW).
References: 1 U.S. Courts, http://www.uscourts.gov/bankruptcycourts.html 2 “Too-easy Bankruptcy Laws Give Abusers a Free Ride,” Editorial, USA Today, David Mazzarella, Editor, October 4, 1996 3 Larry Burkett, “Should Christians Declare Bankruptcy?” Moody Magazine, October 1982 4 Letter 4, 1877, Ellen G. White 5 “Bankruptcy,” Crown Financial Ministries, October 25, 2004, http://www.crown.org/ Library/ViewArticle.aspx?ArticleId=113&FullMode=true Other reference: http://www.uscourts.gov/library/bankbasic.pdf Distributed by: Upper Columbia Conference Stewardship Ministries. Director: Doug Johnson. Produced by: Pacific Union Conference Stewardship Department. Director: Gordon Botting. Design/Assistant Editor: Carol Lowe.
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Business guru Donald Trump has done it, film stars Burt Reynolds and Kim Basinger have done it, and so have millions of other Americans. “What is it they have done?” you may ask. The answer is: Filed for Bankruptcy. Between 1990 and 2002 the number of bankruptcies in the United States doubled and since then has remained at 1.5 million annually. This year the number is sure to increase as many financially troubled Americans rush to beat the October 17 date when the new bankruptcy law changes signed by President Bush on April 20 of this year go into effect. Chances are that you or someone you know has declared bankruptcy and has seen first hand the difficulties of this financial situation. This issue of the “Stewpot” will attempt to answer some of the questions relating to this subject.
What is Bankruptcy?
“The primary purposes of the law of bankruptcy are: (1) to give an honest debtor a ‘fresh start’ in life by relieving the debtor of most debts, and (2) to repay creditors in an orderly manner to the extent that the debtor has property available for payment.” 1
“Bankruptcies in the USA are over eight times higher than in the Great Depression — 1 per 100 households.” 2
Stewardship is a total life-style. It involves our health, time, talents, environment, relationships, spirituality and finances.
Bankruptcy is governed by the “Bankruptcy Code” which was enacted by Congress in 1978 and has been amended several times. It is the uniform federal law that governs all bankruptcy cases. Following are three of the five basic types of bankruptcy: Chapter 13 allows an individual to restructure their debts and repay creditors over time. Chapter 7 allows the discharge of certain debts (i.e., set free from). There are exceptions, however, such as the IRS, school loans, etc. Chapter 11 is primarily designed for the reorganization of commercial enterprises.
Are There Legitimate Reasons for Bankruptcy?
There are some legitimate reasons for a Christian individual or family to seek protection under federal bankruptcy laws. These might include loss of employment due to unforeseen layoff, an unexpected major illness, or a difficult divorce. However, a few years ago it was reported that only 15% declared bankruptcy due to job problems, 17% for health reasons, and 12% for divorce; interestingly, the number one reason for declaring bankruptcy was that people had “overextended” themselves.2 Having presented some legitimate reasons for declaring bankruptcy, there is the issue of motivation to be considered. Is the bankruptcy action being taken to protect the legitimate rights of the creditors, or are the assets of the debtor being purposefully withheld from the lenders or creditors? Some individuals will transfer their assets to other members of their family or to corporations in an effort to deceive creditors. The Bible says, “Don’t hold back from doing good when it is in your power to do so. Don’t tell those who come to you for help [or for their money], ‘Not right now, but another time,’ just because it is inconvenient for you” (Proverbs 3:27-28 TCW).
Can Anyone File Bankruptcy?
In the United States only an individual or corporation having a place of business or property in the United States can become a bankruptcy debtor. Chapter 13 is only available to those persons with unsecured debts of less than $250,000 and secured debts less than $750,000. Chapter 7, on the other hand, is available to any individual and to the majority of businesses. Chapter 11 is available to both individuals and corporations, the exceptions being stock or commodity brokers.
Should Christians Declare Bankruptcy?
This is not an easy question to answer. First, we should be reminded that Scripture is clear about our responsibilities in money matters. When we fail to repay our debts, God aligns us with the unrighteous. “The wicked borrow money with no intention of paying it back but the righteous pay back what they borrow with interest” (Psalm 37:21 TCW). Second, loans are simply promises to creditors that we will repay, over a period of time, something that we bought with their money: a home, vehicle, furniture, etc. God’s Word reminds us, “He’s not pleased with (His) people who make foolish promises . . . It’s better not to make a promise than to make a promise and not keep it” (Eccl. 5:4-5 TCW). “Be careful not to let your emotions lead you into making rash promises you can’t keep” (Eccl. 5:6 TCW). Third, in the majority of cases declared by an individual or family, the declaration of bankruptcy is only a symptom of the real problem, which is that of violating both God’s principles and accepted human laws of financial management.
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Is Bankruptcy the Only Option?
Some years ago Larry Burkett, the late president of Crown, a Christian financial organization, wrote the following paragraph that is still applicable today: “As a financial counselor helping struggling families, I’ve never found bankruptcy to be a ‘necessary’ alternative. Instead, we’ve always found a way to work out a repayment plan, provided the borrowers are willing to give up their ‘rights’ and accept their responsibilities. The procedure for averting a bankruptcy is simple — don’t withhold anything from the creditors, and reveal the whole truth.” 3
“Although our nation’s legal system may discharge debts through a bankruptcy process, God’s people should still repay their debts in full, even after a bankruptcy.” 5
October 2005
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the Stewpot