The Moral Hypocrisy of Avoiding Bankruptcy. It’s Good Enough for Your Church.

Having lived through bankruptcy myself I find it very interesting to observe the camps of bankruptcy lovers and haters. Admittedly I was once in the avoid bankruptcy camp because I just wasn’t well prepared for the experience and didn’t have the right frame of mind.

But recent news of the Catholic church filing bankruptcy yet again to deal with claims they can’t pay made me revisit the topic of the morality of bankruptcy.

Just on face value, if bankruptcy is a sin and moral failure, then why is it good enough for the Church but evil for the individual?

The Catholic church isn’t alone in seeking bankruptcy protection for problem debts. According to one study, in a five-year period (2006-2011) nearly 500 other churches and faith-based entities did as well.

Of the churches filing for bankruptcy protection, about 44% were nondenominational Christian, 28% Baptist, 9% Church of God in Christ, 7% other Christian groups, 5% other religions, 3% Apostolic, and a little left over. – Source

A paper written by Pamela Foohey of the Indiana University Maurer School of Law took a look at these religious findings. She said, “Based on the successful reorganizations and continued operations of some of the debtors in the study, it finds that Chapter 11 has the potential to provide a productive means for addressing their financial problems by offering religious organizations an avenue to rehabilitate their operations following economic downturns, failures and transitions in leadership, and standstills in negotiating with creditors.” – Source

So why is it bankruptcy is good for churches and yet people feel it is a moral failure for them?

Hell, even devout Dave Ramsey has softened his position over the years. His website now ironically says “Dave and his team will explore every possible scenario to keep from suggesting bankruptcy, but sometimes it’s the only reasonable option.” If it is a reasonable option, why keep from suggesting it? He also says, “He’ll be the first one to tell you there’s hope after bankruptcy.”

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I previously wrote about Ramsey’s former hardline bankruptcy position in this article and this one.

Foohey said churches who filed bankruptcy came away with a new perspective. “Some of the religious leaders I talked with said that their churches’ bankruptcy cases had changed their outlook on bankruptcy and their messages to their congregations. Their members likely will continue to feel guilty for not being able to repay their debts because feelings of guilt come from many sources other than religious teachings. But religious leaders have an opportunity to educate their communities about the usefulness of bankruptcy in times of financial despair instead of adding to people’s guilt and shame,” she said.

Foohey added, “Individuals and families who file for bankruptcy consistently express that they feel guilty for turning to bankruptcy. They feel that they have done something wrong, both in the eyes of their communities and their own eyes. These feelings can come from a variety of sources, including what they hear in church about the wrongness of not paying back debts. Leaders of churches also express that they feel guilty for turning to bankruptcy to deal with their congregations’ financial problems. They worry about how filing reflects on their churches, particularly when the leaders themselves have preached that bankruptcy simply is not an option for Christians. Yet churches across the country file for bankruptcy is not insignificant numbers—about 90 per year. And their leaders find that bankruptcy is not the end of the world or the end of their congregations’ worthiness. Instead, bankruptcy often provides an opportunity for the congregation to get back on track.”

So what does the bible say about bankruptcy? This previous article talks about the scriptural foundation of bankruptcy.

Let me be clear, I’m not suggesting if people can pay their debts, meet their obligations, and set some aside for retirement that they should file bankruptcy instead.

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What I am suggesting is that if someone is discounting bankruptcy because of a moral objection based in religion, it might be worth looking more closely at those assumptions to see what bankruptcy offers that has been good enough for about 800 faith-based organizations in the last eight years.

A question I’ve never had a chance to ask someone who feels a strong moral objection to bankruptcy is if they think God would rather them suffer or enjoy a legal fresh start. I suppose it depends on if your God is one of punishment or forgiveness. What do you think?

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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