Ethical and Religious Concerns
Aren’t There Ethical, Religious or Other Reasons Why I Shouldn’t File for Bankruptcy?
Many of our clients are reluctant to seriously consider bankruptcy because they have moral or even religious concerns. We have deep respect for the rights of individuals to believe and feel as they see fit about personal matters. We also respect the sense of duty that makes borrowers want to fulfill the obligations that they have made. However, we would like to share some interesting perspectives and facts that we have learned over the years, while also raising some important questions. You ultimately have the power to choose whether to file for bankruptcy. Our role as lawyers is to counsel you to help you make the best possible decision for you. We respect our clients and their ability to choose what is best for them.Morality
The definition of morality is a person’s concerns for the principles of right and wrong and how the behaviors they engage in match up with those principles. It is clearly important for individuals to live up to their obligations. However, consider this: What if a bank, credit card company, or other lender extended far more credit to you than they reasonably or prudently should have? What if they did that to sell your debt to someone else and make a profit? What if a lender charges you astronomical interest rates and late fees when you are unable to repay a sum that a reasonably prudent company would not have lent you in the first place? What if that lender then further refuses to try to work out a fair payment plan with you? What if the lender then sells your debt to a collection agency that calls and writes you threatening letters? How moral are those actions?
At what point is it no longer morally acceptable to let your debts to others jeopardize your commitments to yourself, your health, and your loved ones? What’s the moral and right thing to do then? Protect yourself, your health, and your family? Or should you protect companies that might have made bad business decisions or who may not have acted in good faith in other ways? It is important to keep in mind that you are free to repay discharged debts after you receive a bankruptcy discharge if you would like. In fact, you would likely be more financially able to do that after bankruptcy.
The U.S. Bankruptcy Code itself contains some important “moral” components. First, the code requires anyone who files for bankruptcy to have “clean hands,” meaning they must have acted in good faith. That means that a debtor cannot discharge debts that involve fraud, driving under the influence, and deliberate wrongdoing. You also cannot use bankruptcy to discharge secured loans, child support obligations, alimony, and most student loans and taxes. The bankruptcy system uses these and other devices to balance justice and morality in the process of providing society with a very crucial and legitimate process for debt forgiveness.
Congress has the authority to establish “uniform laws on the subject of bankruptcies throughout the United States” under Article 1, Section 8, Clause 4 of the U.S. Constitution. The Constitution is the foundation and source of all legal authority in the United States. It created our system of a representative and democratic government, and it established the framework of a unique three-branch system with checks and balances incorporated into each branch’s powers. It also set out the federal government’s role as it relates to the states, citizens, and everyone within the United States. Our founding fathers knew that it was necessary to set up a system that allows for individuals and corporations to discharge debts in bankruptcy. This legitimate and important function is directly addressed in our nation’s most important and powerful document—the U.S. Constitution.Religion
The basic idea of bankruptcy—which is really forgiveness—is a theme that runs throughout the Bible. In fact, the Bible specifically refers to the forgiveness of debt. Biblical law required debts to be released after seven years. “At the end of every seven years you shall grant a release of debts. And this is the form of the release: Every creditor who has lent anything to his neighbor shall release it; he shall not require it of his neighbor or his brother, because it is called the Lord’s release” (Deuteronomy 15:1-2). American bankruptcy law adds one year to the biblical cycle by permitting debtors to discharge their debts in sequential chapter 7 actions once every eight years.
The Bible also directs us to ask God to “forgive us our debts as we forgive our debtors” (Matthew 6:12, Luke 11:4). And it emphasizes the significance of debt forgiveness: “And when they had nothing with which to repay, he freely forgave them both” (Luke 7:42).
As an aside, interest was not even allowed during the time of the Old Testament: “If you lend money to My people, to the poor among you, do not act toward them as a creditor; exact no interest from them” (Exodus 22:24). And even if you borrowed money and used a cloak as collateral, that had to be returned at night for sleeping in the cold. (Ex. 22: 25-26). For more debt-related laws, see Leviticus 25:35-37 (“If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit."); Deuteronomy 23:20-21 ("You may charge a foreigner interest, but not a fellow Israelite, so that the Lord your God may bless you in everything you put your hand to in the land you are entering to possess."); and Deuteronomy 24:6 ("Do not take a pair of millstones--not even the upper one--as security for a debt, because that would be taking a person's livelihood as security.").
The Old Testament also specified that if an Israelite borrower was forced into debt servitude due to their failure to pay off an interest-free loan, the debtor must be released by the end of the sixth year of service even if they did not finish paying off the debt. In this instance, the rest of the debt is discharged. (Exodus 21:2).
But I Feel Like I am A Failure If I File for Bankruptcy
Filing bankruptcy does not make you a failure! Here are just a few examples of extremely successful people who have filed for bankruptcy at some point in their lives:
- Walt Disney declared bankruptcy before eventually creating Disney World in Orlando.
- P.T. Barnum filed for bankruptcy and four years later got into the circus business.
- Kim Bassinger, after her bankruptcy, went on to win an Oscar for her role in the movie L.A. Confidential.
- Lorraine Bracco was bankrupt before she played the role of a psychologist on the incredibly successful HBO show, “The Sopranos.”
- Toni Braxton filed and later went on to sign a $25 million singing contract.
- Francis Ford Coppola recovered from bankruptcy to become the director of the Godfather trilogy, winner of five Academy Awards and owner of a successful winery.
- Henry John Heinz filed for bankruptcy as his company that made horseradish, pickles, sauerkraut, and vinegar went out of business. He immediately started another company introducing a new condiment, ketchup.
- Larry King filed for bankruptcy in 1960 and then again in 1978.
- Henry Ford filed for bankruptcy after his first of three automobile companies failed. A second one was also a failure. Then, at the age of 40, he created a third company, the Ford Motor Company.
If you or anyone you know is considering filing for bankruptcy and obtaining a fresh start from debt and financial challenges, call our Fort Lauderdale and Hollywood bankruptcy lawyers today at (754) 400-5150 or contact us online. Let the Law Offices of Evan M. Rosen serve you!