The word Bankruptcy means “Broken Bench”. So it is not a scary word even though people are scared to even look into filing for bankruptcy because they don’t know the meaning of the word, how bankruptcy was created, and they don’t realize the great things bankruptcy can do for them like wipe out debts without hurting their credit.
In the Bible, in Deuteronomy, the reason for God creating bankruptcy and the forgiveness of debts is because God did not like what was happening to those who owed their creditors for goods. Back then, most were carpenters, tool makers and other types of craftsman and worked on benches to make a living for their families. When they owed their creditors for goods or materials and could not pay them, the creditor would come along and break the worker’s bench. This was devastating to the craftsman and he could not earn a living for his family. God stepped in and created bankruptcy. Again, meaning “broken bench”.
In Deuteronomy, God proclaims “At the end of every seven-year period you shall have a relaxation of debts, which shall be observed as follows. Every creditor shall relax his claim on what he has loaned his neighbor; he must not press his neighbor, his kinsman, because a relaxation in honor of the LORD has been proclaimed”.
In the Book of Leviticus: Moses announces God’s decree that special years be set aside for the forgiveness of debt, freeing of slaves, and other measures re-balancing the social order.
It was never God’s intention to create a society where debt was a crime. We see a society where loans were kept to a minimum by law, and gratuity and charity, were kept to a maximum by law. To accomplish this end, God did not outlaw borrowing and lending, but instead He provided that loans would eventually become gifts, and thereby limited loans only to those in need. He permitted the loan to take place, and the obligation to repay to occur, but He limited the legal obligation to repay to a maximum of only seven years. Every seventh year all lenders were to release their debtors from all of their debts. Every seventh year, the debtors were discharged from all their loans and were no longer legally obligated to repay them. The debtor was free of all loans by force of law.
“At the end of every seven years thou shalt make a release. And this is the manner of the release: every creditor who lends ought unto his neighbor, shall release it; he shall not exact it of his neighbor, or of his brother, because it is called the Lord’s release”. Deut. 15:1,2.
In our modern version of the law, it is your right to obtain a Chapter 7 discharge every 8 years. But, if you need to file another bankruptcy and it has not been 8 years since you filed your previous Chapter 7 case, you may qualify for a Chapter 13. Under the new laws, you can qualify to file a Chapter 13 four years after filing a prior Chapter 7 case.