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Personal Finance From a Biblical Perspective

4 Reasons Why I Will Not File For Bankruptcy

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Most of the people who I talk to have debt. Debt is one of the major reasons behind this country’s economic growth over the past 40 or 50 years. Many people use credit cards to buy gas, computers, clothing, and a host of other items. On top of that, many people will borrow money to buy furniture, education, cars, and houses at some point in their life. It has pretty much become a way of life in this country, and I am no different.

When counseling clients (or just speaking with friends & acquaintances) about their finances, I will sometimes mention that I am currently paying off over $100,000 in debt. Oftentimes, the topic of bankruptcy will come up. They want to know why someone who doesn’t own a home, or other expensive assets, wouldn’t simply file for bankruptcy and get a “fresh start”.

Why I Will Not File For Bankruptcy

There are four basic reasons that I have for choosing not to file for bankruptcy (for the record, my wife agrees with this decision, but I will just speak of myself in this article)…

Integrity (I Gave My Word)

The main reason why I won’t file for bankruptcy is because of my word. When I signed up for all of those loans, I not only received the money (or line of credit), but I also received an obligation to repay that money according to the terms of the various agreements!

All of those agreements have a few things in common. I asked (sometimes begged) for money, they said ‘yes’ as long as I agreed to pay the money back, I gave them my word by signing a contract, I gladly spent the money, and now I’ve been paying it back every since.

By signing those agreements I put my word and integrity on the line. If I try to get out of those obligations, I will fail to keep my word and end up dishonoring God in the process!

To me, that is the strongest argument against filing for bankruptcy. I knew exactly what I was getting into when I signed those agreements, and I have an obligation to pay them back. It really bothers me when I see people trying to weasel their way out of an arrangement which they not only agreed to, but from which they also greatly benefited! They enjoyed all of the benefits of the arrangement, but when it came time to “pay the piper”, they claim that they should not be held responsible to keep their word! I don’t want to be one of those people if I can help it.

Protection Against Making The Same Mistakes

I have known plenty of people who have either filed for bankruptcy or have taken out debt consolidation loans, and have gone right back to their old habits once their credit cards were cleared. It takes time for most people to change their horrible money habits, and taking the time to pay off debt in a more conventional manner can give one a chance to develop good financial practices.

By not taking the easy way out, I have been forced to develop and revise a budget, look for ways to reduce my expenses, try to develop other streams of income, and set guidelines for evaluating purchases. Had I been given a clean slate directly after feeling the full weight of my debt, I may not have acknowledged and changed my horrible financial habits, which got me into this mess in the first place (most of our debt is from student loans, but we made some bad decisions along the way as well).

This concept not only works with finances, but it also works with our health, and even our ability to learn. Going on a quick, fad diet may help us drop weight pretty quickly, but it is usually harder to maintain the weight loss once you return to a more normal way of life. Likewise, it is much more beneficial to study a subject over time in order to let the foundational topics sink into our thinking, and then build upon that. If we decide to cram a day or two before we need to use the information, it will be much harder to incorporate it into our normal thought process.

So, by forcing myself to take the hard way out, I not only can identify what I did wrong, but I get a chance to develop a system that will benefit my family for decades after we become debt free!

Satisfaction (I Love A Challenge)

As I think about it, I think that even if I wasn’t convinced of my obligation to repay the loans, I would still choose to pay them back. I love a challenge, and having to pay off over $100k in debt is definitely a challenge!

I want the satisfaction of being able to look back over time and seeing the amount of progress that I have made. This is the same reason why I would never have surgery to lose weight (besides the very serious health risks) – I want to get into shape through discipline and making wise choices!

I want to pay off debt by making sacrifices, exercising discipline, making wise choices, and honoring all of my commitments. Since it won’t be easy to pay off this much debt – especially with one income – I feel that it is more of a challenge than if I only owed $10k or so.

To Serve As An Example

I also feel that I can point to my own situation to be an example for others in my situation. I managed to pay off a huge chunk of debt when I was younger (and making a little more than minimum wage), and I can look to that experience to give me confidence that I can do it again.

I want others (especially some of my clients) to see that I was able to overcome a mountain of debt, and avoid filing for bankruptcy to do it, and have them be able to use a small part of my experience as motivation. If I am telling them not to take the easy way out, I want to be able to assure them that it is worth it!

For some reason we humans are better able to take advice from someone if they have been through what we are currently going through. So if I want to convince someone that bankruptcy isn’t the answer, I need to be able to show them that the alternatives work!

Is This The Only “Right” Decision?

Keep in mind that this article is more about expressing my views on the subject, rather than giving a generic, one-size-fits-all piece of financial advice. Every situation is different, but for the most part, bankruptcy is a quick fix with a huge downside.

Of course there are people who are so crippled by their debt, that bankruptcy seems to be the only option to stop them from being homeless. Each case is different, but please be sure to make this decision with a lot of prayer, reflection, and wise counsel.

I plan to take a more detailed look at the subject of bankruptcy, from a biblical point of view in the near future. You may be surprised by how much the bible has to say about this topic, even though the actual word is never used.

Reader Questions

  1. Have you even been in a situation where filing for bankruptcy seemed to be the best solution?
  2. If you refused to file, what was your reason?
  3. Have you ever declared bankruptcy? If so, was it a struggle to make that decision?
  4. Also, how long was it before you recovered financially?

photo courtesy of FreeDigitalPhotos.net

The Monetary Policy Debate: Austerity Or Stimulus?

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The Monetary Policy Debate: Austerity or Stimulus?

The global economy is unchartered waters at the moment.  The world has never received a systemic financial shock like it did in 2008 when the Global Credit Crisis erupted and nearly destroyed the current global economy as we know it.  Literally, there was a stretch of a few days during the fall of 2008 when the outcome was uncertain.

There was a small window of time where complete and utter chaos and economic collapse seemed imminent.  However, global leaders gathered together and acted in unprecedented unity in order to stave off a financial Armageddon, as developed nations around the world slashed interest rates and injected trillions of dollars into their economies in an attempt to free up frozen credit markets and stimulate economic growth.

Now, over two years after the near-collapse, the global economy is still struggling to find a sure footing.  The United States economy has definitely rebounded well of its lows of early 2009, but the long-term prospects are still daunting.  The Federal Reserve had to inject a second round of quantitative easing into the economy in November 2010 in order to, hopefully, spur economic growth and job creation, which remain two persistent problems in the U.S.

In the Euro Zone, disaster seems to keep knocking on the door.  First, it was the Global Credit Crisis, second, it was Greece needing a bailout, third, it was Ireland’s banking system needing a bailout, and now, it seems that Portugal, Belgium, and Spain are all in big trouble.  Several peripheral countries in the Euro Zone are still facing recessions and contracting growth.

In the United Kingdom, prices are rising, but economic growth is not.  That is one of the most deadly combinations a n economy can face because rising prices require higher interest rates in order to curb inflation, while a lack of economic growth requires the exact opposite in order to spur economic growth.

Thus, what is a country to do?  Preliminary GDP figures came out in January 2011 a full percentage point lower than the market had expected.

The Monetary Policy Response: Do We Stimulate More?

This is the debate that is raging among economists and experts around the world.  Should struggling countries continue to inject stimulus into their economies in hopes of jump-starting them, or should they rein in government spending and let the free market do its work?

In the Euro Zone, the European Central Bank and International Monetary Fund have opted for austerity.  In order for Greece, Ireland, and other weak countries to receive bailout funds, these countries must first agree to very strict austerity measures.  These measures typically include things like slashing government spending, which generally means cutting government programs and slashing government wages.

These countries do not receive their bailout funds in one lump payment.  Instead, they will receive the funds in several distributions, and at each distribution the struggling country has to prove it has done what it was required to do.  If it has not, then the struggling country will not get the next bailout distribution.

This can lead the euro drop quickly.  A person can search for the best forex broker to find charting packages that allow a person to track the movement of the euro versus other currencies in the FX market. Keep in mind that trading currencies on margin is risky.

The United States, on the other hand, has not adopted any austerity measures.  Instead, it has continued to spend money at a rapid rate.  Currently, the United States has injected about $2.3 trillion into the economy over the last two years.

Back to our original thought in this article—we are in unchartered territory.  The truth is that no one knows what the long-term effects of massive stimulus spending will be.  Some believe that inflation will become rampant, while others believe there will be no inflation.  Unfortunately, we are the mercy of time.  In the end, time will reveal exactly what the consequences will be.

photo by renjith krishnan

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