Bankruptcy in the Bible

Deuteronomy defines bankruptcy in the Bible. But the Bible also frequently mentions lending, fair pay, creditors, interest payments, and money in general. Let’s start out with one of Jesus’ most important messages before we take a look at the Old Testament.

The Golden Rule

You may know of the so-called Golden Rule from the Sermon on the Mount: Do unto others as you would have them do unto you. But there is another, less-cited Golden Rule in the Bible.

The rich rule over the poor, and the borrower is the slave of the lender.

— Proverbs 22: 7 NIV

Thus, in the Bible, borrowers are slaves to the rich. In other words, he who has the gold makes the rules. This may be common knowledge today, but eight or nine thousand years ago it was hardly conventional wisdom.

Biblical ambivalence toward money is both prevalent and palpable. In fact, the Bible contains stern words for borrowers and lenders alike.

The Bible Warns Borrowers

Once a borrower has the money in hand, the Bible is silent. In the Bible, most people desire to repay what they owe.

On the other hand, only the wicked borrow with no intention of repaying. These debtors, according to the Bible, go to hell. Psalms contrasts them with the generous, who give instead of borrowing:

The wicked borrows but does not pay back, but the righteous is generous and gives.

— Psalms 37: 21 ESV

Yet the Bible visits its wrath upon borrowers with premeditated evil intent, and not upon borrowers in general. Instead, it advises the careful consideration of acceptance of credit:

It is better that you should not vow than that you should vow and not pay.

— Ecclesiastes 5: 5 ESV

While better not to borrow at all, it is even better not to borrow and not repay. God takes a worse view, however, of extortionate creditors.

The Bible Takes Creditors to Task

The Bible makes no qualms about the spiritual dangers of making money for money’s sake:

The love of money is a root of all kinds of evils.

— 1 Timothy 6: 10 ESV

And creditors are encouraged to earn the love of those to whom they lend.

Two men were debtors to a certain moneylender. One owed him five hundred, and the other fifty. When they were unable to repay him, he forgave both of them. Which one, then, will love him more?

— Luke 7: 41 NIV

And early in the Torah, the Bible makes clear that the exaction of interest from the poor is a sin:

If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.

— Exodus 22: 25-27 ESV

So lenders should love their debtors. They should not love money. They should forgive. And they should not profit from the poor. Jesus put these words into action:

Jesus went into the temple of God, and cast out all them that sold and bought in the temple, and overthrew the tables of the moneychangers, and the seats of them that sold doves. And he said unto them, “My house shall be a house of prayer; but you have made it a den of thieves.”

— Matthew 21: 12–17 KJV

The expulsion of the moneychangers from the temple is so important in the New Testament that it is described in all of the first four books. See also Mark 11:15-19, Luke 19:45-48, and John 2:13-16. The moneychangers in biblical times exchanged one currency for another for a fee. Their profession was not favored by the Lord.

The Bible has plenty to say about employers, too. For instance, just to name one, look at Deuteronomy 24:14–15: “Do not take advantage of a hired worker who is poor and needy.”

Bankruptcy in the Bible

The first truly codified bankruptcy laws were the Statute of Bankrupts (1542) in England. But bankruptcy in practice has existed much longer. Approximately 3,300 years earlier, in Deuteronomy, a book in the Old Testament, it was written:

At the end of every seven years thou shalt make a release: Every creditor that lendeth ought unto his neighbour shall release it; he shall not exact it of his neighbour, or of his brother; because it is called the Lord’s release.

— Deuteronomy 15: 1-2 KJV

This Biblical “release” is another word for bankruptcy. If a debtor can’t repay a debt in seven years, the lender should release the debtor.

Lenders should make better decisions about to whom to lend. Borrowers should make better decisions about when to borrow, and for what purposes. But after seven years, unpaid debts should be forgiven. The rationale for bankruptcy in the Bible translates readily to modern times.