Christianity and Bankruptcy

Although the term “bankruptcy” is nowhere to be found in the Bible, debt and the consequences of default are a major theme both in the Hebrew Bible and in the New Testament. In Israel, as in the ancient Near East generally, a debtor who defaulted on his obligations was often sold into slavery or servitude. Biblical law moderated the harshness of this system by prohibiting Israelites from charging interest on loans to one another, thus diminishing the risk of default, and by requiring the release of slaves after seven years of service. Jesus alluded to the lending laws at least once, and he frequently used economic illustrations in his teaching, linking forgiveness of sins to debt relief in the Lord's Prayer and in one of his parables.In this essay, I very briefly describe the evolution of bankruptcy, focusing most extensively on a proposal by the early novelist Daniel DeFoe to reform English insolvency law. I then turn to the essay's principal focus: the implications of Biblical teaching on debt and debt relief for modern bankruptcy law, especially American bankruptcy law. The past century has seen a significant expansion of personal bankruptcy law, the emergence of corporate bankruptcy, and most recently a debate over whether over-indebted countries should have access to bankruptcy relief. I consider whether each of these developments can be seen as reflecting Christian principles, and what a more fully Christian vision of bankruptcy law might look like