Trusted Voice® Blog

Friday, June 3, 2016

The Moral Basis Of Debt Settlement

 This blog is written for, and dedicated to, dear believers in Christ who struggle with the idea of paying creditors less than what is owed.

I met with a Christian client to discuss eliminating his debt through debt settlement.  Years ago, he was seriously ill, and, as a result, was deep in debt. He wanted to file bankruptcy, but was counseled, as many Christians are, that it is wrong for a Christian to do so even if the debt is due to illness. Based on this mindset, he decided not to file bankruptcy. Instead, he took the advice of another believer and pursued an investment “opportunity” that was sure to not only get him out of debt, but bring financial independence. Unfortunately, this “opportunity” turned out to be a scam, and, as a result, he is even further in debt than before. Had he received good counsel when he was considering bankruptcy, it would have saved him years of financial hardship and other mistakes. I do not believe it is per se wrong for a Christian to file bankruptcy for the reasons set forth in my article entitled “Bankruptcy – Is it a Sin or Unbiblical to File?” which appeared in The Good News, a Christian newspaper.

There is even a stronger moral basis for debt settlement than bankruptcy. By “debt settlement”, I’m referring to negotiating an arrangement whereby the borrower pays the lender less than what it is owed in exchange for the lender’s agreement to release the borrower from any further obligation on the debt.

The moral basis for debt settlement is quite simple when you think about it. There are two sides to any contract or agreement. Let’s take a credit card for example. The borrower has a moral and legal obligation to repay the charges on the card; the credit card company, in turn, has a moral and legal obligation not to engage in unfair, misleading, deceptive, abusive or illegal conduct. When a credit card company engages in such conduct, it gives the card holder a moral and legal basis to negotiate a settlement and pay less than the full amount owed.

Makes sense and pretty straightforward – right? Then why do so many Christians feel they are doing something wrong in paying a creditor less than what is owed? I firmly believe it’s because essentially all you hear in the Body of Christ is about our responsibility, as Christians, to repay our debt; while that is true, it is also true that creditors have a responsibility, on their end, to comply with the law - something glossed over in Christian circles. Believers in Christ would be very surprised if they knew the extent to which creditors engage in illegal practices. Creditors make untold millions of dollars by violating the law and often don’t get caught. If a credit card company, for instance, illegally overcharges each of its customers a couple of dollars and has say 40 million customers, it just racked in an extra $80 million.  And, trust me, they do far worse things than simply adding on illegal charges. For instance, Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, GMAC and a number of other major banks have admitted using fake affidavits in mortgage foreclosure proceedings in which hundreds of thousands of homeowners and families lost their homes. That’s just the tip of the iceberg.  Do a little internet research on deceptive and abusive creditor/lending practices and you’ll be shocked at what you find.

 By reason of the foregoing, I believe there is clearly a strong moral foundation to reach a settlement with a creditor whereby you pay less than what is owed (Luke 12:58; Luke 16:1-8). If you do explore settlement, there are a number of important issues that must be considered and addressed. I handle, and am currently accepting, debt settlement cases.

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