Is It OK for Christians to Declare Bankruptcy? (2024)

FAQs

Is It OK for Christians to Declare Bankruptcy? ›

People used to avoid bankruptcy if at all possible because of the stigma of financial failure. Today, however, it has become more socially acceptable and people are filing for it in droves. The Bible never prohibits bankruptcy, but it does discourage it.

If you have mismanaged your finances, confess your failings to God now. You can receive, by faith, His forgiveness and cleansing (1 John 1:9). Remember, there is no condemnation or guilt to those who are in Christ Jesus (Romans 8:1). Jesus, by His love and mercy, gave us a fresh start, a new birth.

Ultimately, although a bankruptcy filing is not ethically wrong, a potential debtor must address their own moral compass when filing for bankruptcy. Life happens. What we can financially afford to do may conflict with what we believe we must morally do.

Bankruptcy can provide financial relief in the form of a restructured debt repayment plan or a liquidation of certain assets to pay off a portion of your debt. Although bankruptcy may be unavoidable for some, it can severely damage your credit score, so it's crucial to pursue all alternatives before considering it.

Is it a sin and against my Catholic religion to file for bankruptcy? Does it violate the Seventh Commandment: Thou shalt not steal? No, it is not a sin, presuming that you do nothing illegal to hide your financial assets and that you cooperate with the relevant civil laws about bankruptcy.

If you are finding it difficult to pay your debts, filing for bankruptcy is ethical, legal, and may be the best option given your situation.

A bad faith filing is one that is inconsistent with the purposes of bankruptcy or is an abuse of the bankruptcy system. However, the applicable Bankruptcy Code provisions regulating dismissal of a Chapter 7 petition will differ for different types of debtors.

Credit Will Be More Expensive and Limited. After declaring bankruptcy, you'll have to work hard to raise your credit score. You will likely face limited access to credit and very high interest rates until you can rebuild your financial reputation.

Bankruptcy frees you from debt collection, but the headaches can linger for years. Debt settlement without bankruptcy can take more time but — if negotiated properly — can do less damage to your credit. Debt settlement stays on your credit report for seven years, but has less negative impact on your credit score.

How Does Bankruptcy Affect a Job and Future Credit? Although bankruptcy shouldn't affect your job in most situations, as discussed above, bankruptcy will impact your credit. Most filer's credit scores drop immediately after bankruptcy. Still, they usually improve with careful credit use within a couple of years.

How much debt is too little for bankruptcy? ›

There is no minimum amount of debt required to file for bankruptcy. That said, if you have less than $10,000 worth of unsecured debt, it's probably not worth it due to lawyer fees, plus long-term consequences.

Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. Section 523(a) of the Code specifically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy.

Chapter 7 bankruptcy is a type of bankruptcy filing commonly referred to as liquidation because it involves selling the debtor's assets in bankruptcy. Assets, like real estate, vehicles, and business-related property, are included in a Chapter 7 filing.

If you have failed in your finances, admit your failure to God. Romans 8:1 says: “There is therefore no condemnation for those who are in Christ Jesus.” If you are a Christian, God will forgive you for your financial failings and give you a “fresh start” in your life.

Blessed are those who see themselves as they really are, which is spiritually bankrupt. Jesus also said, “Blessed are those who mourn, for they shall be comforted” (Matthew 5:4 NKJV). Here the idea of mourning is being sorry for our sin. It's mourning over our sin.

What's referred to as the “seven deadly sins” are: lust, gluttony, greed, laziness, wrath, envy, and pride. Although all of these things are sinful, no where in the Bible are they called deadly sins, and no where in the scriptures are they compiled into one list.

Debts bankruptcy can't erase include alimony, child support, many legal penalties, tax obligations and (with exceptions) federal student loans.

Bankruptcy can relieve the stress of debt, but it can also cause you to lose some valuable assets and impact your credit for up to 10 years. However, if bankruptcy is your only option, it can be a way to get control over your finances and turn things around.

The bottom line. While your credit score will typically take a significant hit after a bankruptcy filing, with hard work, patience and discipline it is possible to fully recover and get back on your feet.