The Biblical Perspective

So what does The Bible say about bankruptcy? Does it even mention bankruptcy? There has been much debate over this question, and it could surely be answered many ways. But since this is my bankruptcy story, the only answer you'll find here is my answer.

I've thoroughly searched The Bible for passages relating to debt and/or bankruptcy. I've found three of note:

Romans 13:7
Pay everyone whatever you owe them. If you owe taxes, pay them. If you owe tolls, pay them. If you owe someone respect, respect that person. If you owe someone honor, honor that person.
13:8 Pay your debts as they come due.

My interpretation: Clearly, it is expected of us to make every attempt to pay our debts.

Proverbs 22:27
If thou have not wherewith to pay, why should he take away thy bed from under thee?

My interpretation: If a debtor is unable to pay what he owes, this should not automatically result in him giving up everything he owns to satisfy the debt.

Deuteronomy 15:1
At the end of every seven years, you must cancel debts.
15:2 This is what you will do: If you've made a loan, don't collect payment on the debt your neighbor still owes you. Don't demand that your neighbor or relative pay you, because the time for suspending payments on debts has been proclaimed in the LORD'S honor.

My interpretation: In ancient Israel, as instructed by Moses, creditors were to cancel debts that were not yet paid every seven years. This is a built in fresh start for those who -- for whatever reason -- find themselves too deep in the debt hole. Why would Moses teach such a thing? I have a theory.

Look at the world today. Banks get bigger and bigger as they gobble up competitors. Ninety percent of the world's wealth is held by ten percent of the population. And the other ninety percent borrows or does without. How likely do you think the mega-conglomerates like Chase, Bank of America, and others would be to lord their wealth over the majority of the population if they knew that their loans would be worthless in just seven years? Such requirements today would reduce the number of large loans made and decrease the total debt burden for an individual to that which he could reasonably pay off in less than seven years. The end result: less poverty, less debt, less bankruptcy.

Read The Bible and interpret it as you will. I acknowledge that we should attempt to pay off our debts. But what happens when you get in the debt hole too deep? Should the banks be able to shovel the dirt in after you with higher finance charges and late fees? No! They, too, should have some responsibility for their lending practices. They should help to pull you up out of that hole, dust you off, and send you on your way with a fresh start. That's my opinion.

More Creditor Contacts

I prepared a couple of brief letters today to creditors.

One to the dealership (a Buy Here/Pay Here branch of a reputable local GM dealer) where we purchased two cars over the past few years. The car we are currently paying on was recently totaled in a roll-over accident. As is common among many people with the debt load that we have, we didn't have auto insurance at the time (we've since corrected that). So the totaled car is sitting in our garage while we continue to make $300 in monthly payments.

The second letter was to the law office that represents the company that filed suit against me earlier this year (I mentioned making an agreed settlement with them in an earlier post.

Both of these are accounts that are two payments behind. The body of each letter consisted of just one sentence:

Please contact my Attorney about the above referenced account.

Then I included contact information for our Attorney. Assuming that it wouldn't be long before they started calling me -- or showed up at my door in the case of the car loan (they don't know that it was totaled) -- and I wanted to head off the inevitable.

The agreed judgement was a bit questionable. There's a court ordered amount that I'm supposed to pay each month on an old credit card bill. By not paying, I'm in violation of that court order. According to my lawyer, even a court ordered judgement can fall under the protection from creditors that bankruptcy will give me. I can only hope that he's right.

The Cost of Bankruptcy

Bankruptcy isn't cheap by any definition. That's another thing that made it such a difficult decision for us. In our case, we'll be filing for Chapter 7 bankruptcy, which will completely relieve almost all of our debts. In our state, the total price tag (court costs, filing fees, and Attorney fees) will be $1500.00. Granted, that's much less than the sum of all the debt we're seeking relief from, but if I had $1500.00 to plunk down at one time, I wouldn't be this far behind on all my bills.

It's almost cost-prohibitive. Those who really need the help that bankruptcy relief provides can't afford it. Those who can afford it could likely apply that cash to outstanding debt.

In this case, we'll be making payments to our Attorney until we reach the $1500.00 bill. Naturally, dealing with someone who is filing for bankruptcy, he isn't extending us any credit. He won't actually make the filing until the whole bill has been paid. But what he does do for us, now that we've sent him the first $100.00 toward the fees, is field calls from debt collectors, relieving us of the hassling phone calls. Having taken care of some of the unwanted calls already, I can honestly say it's a great relief to not have to worry about the phone ringing anymore.

When A Creditor Call

The first good feeling of having hired an Attorney to represent us in bankruptcy came when the first collection company called.

"Hello," the collection agent said after the automated caller connected the line.

I replied, "Hello." After he asked for me by name, I said, "This is him."

He continued, "This is Mark from Truelogic Financial. I am a debt collector, and the puropse of this call is to collect a debt." That's the standard legalese required when debt collectors call. If you're receiving calls from debt collectors who don't advise you who they are and what their intentions are, then they are breaking the law.

"Before you go any further," I interrupted, "I'll give you the name and number of my Attorney and you can contact him."

"Okay," the caller said.

It was that simple. I gave him the name and number of our newly hired Attorney, and he actually said, "Thank you," when we ended the call. It was a very liberating feeling to know that one less debt collector would be calling us every day.

* * *

If only the second debt collector to call -- less than an hour later -- had been as professional.

"I'm calling from Bay Area Collections," the caller announced, then asked for me by name.

"This is he," I answered.

He asked for me again. "That's me," I repeated. This collector was obviously calling from an out-sourced call center somewhere in India, and the language (and culture) barrier would be apparent.

When he asked me to verify my zip code for him, I asked, "What's the purpose of this call?" I guess in India they aren't so concerned with the legal requirements of debt collection.

When he began to run down the standard phrase, I interupted him again. "Before you go any further, I'll give you the name and number of my Attorney and you can contact him."

"And what will he be doing in this matter?" the caller asked.

"You can discuss that with him," I answered. "Are you ready?" When he didn't answer, I responded to his silence with the name of my Attorney. I had to repeat both the first and last name for him, then I had to correct the phone number when he repeated it to me incorrectly.

The caller then asked, "But it's your bill, why should I call him?"

I answered, "I'm going to hang up now. You can contact my Attorney for anything else you need." And with an abrupt "Goodbye," I terminated the call.

As rude as the second caller was, it was a wonderful feeling to have the tools to be just as rude in return.

I'm sure there will be more callers, for a while anyway, but the phone hasn't rang all evening.

Why Bankruptcy

My wife and I have struggled for several years with bad debt. From not being able to buy a cell phone or car to having to settle for less than perfect housing because no one wants to rent to someone with bad credit. I can understand their thinking: if we aren't credit-worthy, we aren't risk-worthy.

But how does a couple get out of the debt hole and ever rebuild their credit? The high cost of living and providing for a family of four makes it impossible to put a dent in the mounting bills. First we owed a hundred, then a thousand, then ten thousand dollars: with the high interest rates and late fees the hole just keeps getting deeper with no end in sight.

Then came the phone calls: collection agencies calling at all hours of the day, from the early morning to late evening. Many of them rude and forceful, several others automated recordings demanding we call them back. When the phone started ringing at 6:00 pm every Sunday, I told my wife it was time to do something.

We've tried several different debt repair methods over the past few years.

Budgeting only works when there's enough money to meet the budget. When the bills add up to considerably more than your income, a budget is useless.

Credit counseling services want so much money for themselves that payments aren't actually applied to your existing debts for several months. And they call themselves "non-profit."

Debt consolidation loans are only available to people who managed to build up a little home equity before falling into the debt hole.

After arranging an "agreed judgement" with the first creditor who sued us and then receiving a second suit in the mail, we started talking seriously about our options.

Bankruptcy has always been at the bottom of our list of options. We knew it was there, but always felt like it was in some way wrong to file bankruptcy, erasing debts that we rightfully owe. We heard so many stories about how long a bankruptcy stays on a credit report, but then unpaid "write-offs" can stay there just as long. Our biggest deterrent was how judgemental my wife's parents are: if they hear about our bankruptcy, they'll never let us hear the end of it.

Then I learned of one of my own employees who filed for bankruptcy and built a brand new home just one year later. We would both love to own our own home. One of my wife's friends -- a very religious woman whose husband is a Christian Minister -- opened up to my wife about their bankruptcy. (More on the Biblical perspective of bankruptcy in a future post.)

With two kids whose futures we want to adequately prepare for, it soon became apparent that bankruptcy might be our only reasonable choice. My wife was still concerned about what her parents would think, but I convinced her that our children's futures are more important than her parents' opinions, and we made our decision: we would file for bankruptcy.