DEBT

"Neither a borrower nor a lender be." - Shakespeare

Sounds good, but in today's reality who isn't in debt? Even those who are careful with credit cards still owe money on their mortgage.This word shares the same root as Mortified which is how many people feel when they look at their monstrous debt.

BANKRUPTCY - IT'S VERY OLD BUT STILL WORKS JUST FINE

Since the U.S. Constitution was written in Philadelphia, the concept of Bankruptcy has been included in our laws. But, as with most laws, people don't quite understand them or know their origin. Contrary to popular belief, declaring bankruptcy is not a perverse legal way to get out of paying what is owed. No, bankruptcy is far from perverse as it is rooted in grace. This means you don't always get what's coming to you. Also, today debtors must ask for forgiveness of debt unlike ancient times where creditors were required by law to forgive debt. Could you imagine getting a slip of paper in the mail after every 7 years. "Your debt has been forgiven."

WHERE THE BIBLE COMES IN

Around 3,500 years ago, debt forgiveness became law to the Israelites as handed down by Moses. In the Book of Deuteronomy the original debt discharge was ordered:

" At the end of every seven years you shall grant a release. And this is the manner of the release: every creditor shall release what he has lent to his neighbor; he shall not exact it of his neighbor, his brother, because the LORD's release has been proclaimed." (Deuteronomy 15:1-2).

Also in the Old Testament, the Prophet Nehemiah proclaimed " ...and we will forego the crops of the seventh year and the exaction of every debt." (Nehemiah 10:31)

The Bible creates a tension in this debt forgiveness. Although you can have your debts forgiven, you should make all efforts to pay back your creditors. " The wicked borrows and does not pay back, but the righteous is gracious and gives." Psalm 37:21

Until recently, the Creditor's side was the dominant side and Debtors were often thrown into Debtor's Prison. Today it would be standing room only.

The legislation widely acknowledged to be the first English bankruptcy statute, 34 & 35 Hen. 8, ch. 4, §1 (1542), contained a provision explaining that the statute was needed to deal with the growing number of debtors who, after " craftily obtaining into their Hands great Substance of other Men's Goods, do suddenly flee to Parts unknown."

Imprisonment for debt was not abolished in England until 1869, and then only subject to certain exceptions. See Debtors Act, 1869

When the original 13 colonies were established, there were grave differences between them concerning debt forgiveness. At the time of the Revolution, only three of the thirteen colonies had laws discharging insolvents of their debts. The remaining colonies could and would throw you into prison for owing money. Because of this difference, a debtor could get fully discharged in the courts of one state and find himself arrested for debts when crossing a state line. After this happened to enough people, the framers of the Constitution added a clause to insure uniform treatment of its citizens.

James Madison saw the effects of a federal bankruptcy law on interstate commerce and wrote in the Federalist Papers that " The power of establishing uniform laws of bankruptcy is so intimately connected with the regulation of commerce, and will prevent so many frauds where the parties or their property may lie or be removed into different States, that the expediency of it seems not likely to be drawn into question."

Our current Bankruptcy Code still adheres to the earlier biblical rules and tension concerning debt forgiveness. Many of the biblical protections survive to this day in the U.S. Bankruptcy Code. For example, if you file bankruptcy, the court exempts your work tools. " No man shall take a mill or an upper millstone in pledge; for he would be taking a life in pledge." ( Deuteronomy 24:6.). The bankruptcy court won't take the clothes off your back. "If ever you take your neighbor's garment in pledge, you shall restore it to him before the sun goes down; for that is his only covering, it is his mantle for his body; in what else shall he sleep? And if he cries to me, I will hear, for I am compassionate." (Exodus 22:27).

BANKRUPTCY: WHEN IT DOESN'T REALLY WORK

If a person has never filed for bankruptcy, has made every effort to pay the people he owes, and simply can't goany further, the bankruptcy court will grant him grace. However, if a person has "gone to the well" before and previously received a bankruptcy discharge, he is likely to be treated with greater scrutiny and may find himself in a more difficult financial condition than he was in before filing bankruptcy.

GRACE - UNMERITED FAVOR

Of course the greatest discharge of debt occurred on a hill just outside the walls of Jerusalem about 2,000 years ago. And there shall never be a filing fee.

"And forgive us our debts as we forgive our debtors." - The Lord's Prayer

Mike Robinson is Senior Partner at Robinson & Henry P.C., Attorneys at Law, 757 Maleta Lane, Suite 104, Castle Rock, CO 80108, ph. 303-688-0944. The firm has a general law practice in Bankruptcy, Tax, Estate Planning,and other legal fields. Mr. Robinson was assisted in this article by Ryan Wood and Julie Robinson of the firm.