Does the Bible Tell Me So?

Many times when people come to see me about debt relief, they don’t want to file bankruptcy. Bankruptcy is seen as an indication that they are “bad” or that they are “unjust” or even “unchristian.”

I am not a Biblical scholar nor am I theologian. However, in Deuteronomy 15:1-3, the Bible does reference debts and the forgiveness of debt. Deuteronomy establishes many concepts that have influenced religious thought and life of both Jews and Christians down through the ages. Moses is generally considered the original author with possibly Joshua authoring the final chapters. Verses are from the King James Version.

“1 At the end of [every] seven years thou shalt make a release. 2 And this [is] the manner of the release: Every creditor that lendeth [ought] unto his neighbour shall release [it]; he shall not exact [it] of his neighbour, or of his brother; because it is called the LORD’S release. 3 Of a foreigner thou mayest exact [it again]: but [that] which is thine with thy brother thine hand shall release;"

The Sabbatical year was also to be a time of release (Deut 15:1) but only in one specific aspect - that all debts between the children of Israel were to be cancelled (Deut 15:2), though a foreigner’s debt was not annulled (Deut 15:3). That the Scriptures teach a canceling of outstanding debt and not just an annulment of the interest on the debt is clear from Deut 15:4-11.

"4 Save when there shall be no poor among you; for the LORD shall greatly bless thee in the land which the LORD thy God giveth thee [for] an inheritance to possess it: 5 Only if thou carefully hearken unto the voice of the LORD thy God, to observe to do all these commandments which I command thee this day. 6 For the LORD thy God blesseth thee, as he promised thee: and thou shalt lend unto many nations, but thou shalt not borrow; and thou shalt reign over many nations, but they shall not reign over thee. 7 If there be among you a poor man of one of thy brethren within any of thy gates in thy land which the LORD thy God giveth thee, thou shalt not harden thine heart, nor shut thine hand from thy poor brother: 8 But thou shalt open thine hand wide unto him, and shalt surely lend him sufficient for his need, [in that] which he wanteth. 9 Beware that there be not a thought in thy wicked heart, saying, The seventh year, the year of release, is at hand; and thine eye be evil against thy poor brother, and thou givest him nought; and he cry unto the LORD against thee, and it be sin unto thee. 10 Thou shalt surely give him, and thine heart shall not be grieved when thou givest unto him: because that for this thing the LORD thy God shall bless thee in all thy works, and in all that thou puttest thine hand unto. 11 For the poor shall never cease out of the land: therefore I command thee, saying, Thou shalt open thine hand wide unto thy brother, to thy poor, and to thy needy, in thy land.”

Discharge of Debts (Bills).

What is a discharge in bankruptcy?

A bankruptcy discharge releases the debtor from personal liability for certain specified types of debts. In other words, the debtor is no longer legally required to pay any debts that are discharged. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts.

When does the discharge occur?

The timing of the discharge varies, depending on the chapter under which the case is filed. In a chapter 7 (liquidation) case, for example, the court usually grants the discharge promptly on expiration of the time fixed for filing a complaint objecting to discharge and the time fixed for filing a motion to dismiss the case for substantial abuse (60 days following the first date set for the 341 meeting). Typically, this occurs about four months after the date the debtor files the petition with the clerk of the bankruptcy court. Since a chapter 12 or chapter 13 plan may provide for payments to be made over three to five years, the discharge typically occurs about four years after the date of filing.

How does the debtor get a discharge?

Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. The Federal Rules of Bankruptcy Procedure provide for the clerk of the bankruptcy court to mail a copy of the order of discharge to all creditors, the U.S. trustee, the trustee in the case, and the trustee's attorney, if any. The debtor and the debtor's attorney also receive copies of the discharge order. The notice, which is simply a copy of the final order of discharge, is not specific as to those debts determined by the court to be non-dischargeable, i.e., not covered by the discharge. The notice informs creditors generally that the debts owed to them have been discharged and that they should not attempt any further collection. They are cautioned in the notice that continuing collection efforts could subject them to punishment for contempt. Any inadvertent failure on the part of the clerk to send the debtor or any creditor a copy of the discharge order promptly within the time required by the rules does not affect the validity of the order granting the discharge.

Will Bankruptcy Affect My Credit?

There is no clear answer to this question. Unfortunately, if you are behind on your bills, your credit may already be bad. Bankruptcies will probably not make things any worse.

The fact that you've filed a bankruptcy can appear on your credit record for ten years. But since bankruptcy wipes out your old debts, you are likely to be in a better position to pay your current bills, and you may be able to get new credit.

What Else Should I Know?

- Utility Services - Public Utilities, such as the electric company, cannot refuse or cut off service because you have filed for bankruptcy. However, the utility can require a deposit for future service and you do have to pay bills that arise after bankruptcy is filed.

- Discrimination - An employer or government agency cannot discriminate against you because you have filed for bankruptcy.

- Driver's License - If you lost your license solely because you couldn't pay court ordered damages caused in an accident, bankruptcy will allow you to get your license back.

- Co-signers - If someone has co-signed a loan with you and you file for bankruptcy, the co-signer may have to pay your debt.

Will Bankruptcy Wipe Out All My Debts?

Yes, with some exceptions.

Bankruptcy will not normally wipe out:

-money owed for child support or alimony fines, and some taxes;

-debts not listed on your bankruptcy petition;

-loans you got by knowingly giving false information to a creditor, who reasonably relied on it in making you the loan;

-debts resulting from "willful and malicious " harm;

-student loans owed to a school or government body, except if, the court decides that payment would be an undue hardship;

-mortgages and other liens that are not paid in the bankruptcy case (but bankruptcy will wipe out your obligation to pay any additional money if the property is sold by the creditor).

Top 10 Bankruptcy Myths

Myth 1: Filing for bankruptcy hurts your credit for 10 years.

Not True. Bankruptcy stays on your credit about 7 to 10 years. Although the bankruptcy will stay on your credit, you can start rebuilding your credit once your bankruptcy is discharged. You will get credit card offers and be extended credit right after the discharge of your bankruptcy. Bankruptcy wipes out debt, which in turn helps your credit score.

Myth 2:Everyone will know you filed for bankruptcy.

Not True. Bankruptcy is public record but unless you are famous, people aren’t going to go looking. The only people who are going to know are those who you tell and those who have access to the bankruptcy court record system.

Myth 3:It's hard to file for bankruptcy.

Not True. The bankruptcy reform act changed only the method in which Debtors qualify for the different types of bankruptcy. It doesn’t prevent people from filing and in most situations people are still able to get the same relief now as before the law changed. There is a lot of paperwork involved, but having a skilled attorney makes the process much smoother. Filing bankruptcy is electronic these days, which minimizes paperwork on your part.

Myth 4:You are a bad person/failure for filing bankruptcy.

Not True. There is a reason that over one million people file for bankruptcy each year and it is not because they are bad people. Bankruptcy is a means for good people who are going through bad times to get relief. Many times people have to file because they have lost their job, gone through divorce, or experienced medical illness. Bad times don’t make a person bad. Bankruptcy can provide the relief that good hardworking people need to get them out of the bad time. It provides hard working people with the fresh start that they deserve, but are not able to obtain.

Myth 5:You will lose everything you own.

Not True. Bankruptcy allows you to keep your property. Outside of bankruptcy you could lose your property to creditors, but once you have filed for bankruptcy you and your property are protected. Bankruptcy doesn’t always wipe out liens, which means if you want to continue to keep the property you will need to continue to pay the lien.

Myth 6:Both you and your spouse have to file bankruptcy together.

Not True. You can file together or separately, that is your choice. In many cases it makes sense for husband and wife to file together, but in some instances the spouse might not want to file. This is absolutely fine and definitely allowed by the court.

Myth 7:You can't get rid of back taxes in bankruptcy.

Depends. You can get rid of income taxes that are more than three years old by filing bankruptcy. There are several qualifications that have to be met in order for the taxes to be wiped out, but having a portion wiped out is better than none at all.

Myth 8:You can only file bankruptcy once.

Not True. You can file for bankruptcy as many times as you like. Although, you are limited by how often you can receive a discharge. You can receive a discharge from Chapter 7 once every 8 years. You can receive a discharge from Chapter 13 every 2 years. If you get discharged in a Chapter 7 you have to wait 6 years before getting a discharge from Chapter 13. If you get a Chapter 13 discharge then you need to wait 4 years to get discharged from a Chapter 7. However, there is no waiting period if your case is dismissed. You can file back to back should you choose.

Myth 9:Creditors can still harass you if you file for bankruptcy.

Not True. When the bankruptcy is filed, automatic protection is put onto you and all of your property instantly. Creditors are not allowed to contact you for any reason, which includes calling or even billing you. If they persist in harassing you, you do have remedies available through the Federal Bankruptcy laws.

Myth 10:Filing bankruptcy is emotional devastating.

Not True. Bankruptcy eliminates debt and eliminates financial stress. Filing bankruptcy is the solution to the problem, not an additional problem. Although making the decision to file bankruptcy might be difficult one, the relief provided will lift a huge weight off of you. You will be able to answer the phone, check the mail, and answer the door without fear that the contact is from a creditor or collection agency.