subject: Understanding Bankruptcy [print this page] Understanding Bankruptcy Understanding Bankruptcy
Understanding Bankruptcy
A bankruptcy action will usually provide only a fraction of the total debt owed to creditors, but creditors are required to accept the liquidation proceeds as total settlement of their debt. Again, in Ron's case, he and Sue committed themselves to repaying everyone who agreed not to join the bankruptcy action. They felt that those creditors who elected to take the bankruptcy proceeds did so voluntarily and thus settled the debt. To be as fair as possible to the creditors who joined the bankruptcy, Ron and Sue retained no salable assets, even though bankruptcy action allows the debtor to keep a small amount of the home equity (if there is a home), one automobile, and a limited amount of cash. Unlike many others who file bankruptcy for their convenience, Ron placed all assets held in Sue's name into the asset pool as well. They withheld nothing from the creditors.
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Bankruptcy is never an action to be taken lightly. The financial consequences and the damage to a reputation are long-lasting for anyone, but especially for a Christian. A creditor has a right to expect to recover the money he has loaned in good faith, and the Bible is clear in its admonition to pay one's vows (promises). I believe that Ron and Sue fulfilled this scriptural principle by going to each of the creditors and explaining why they decided to file for bankruptcy. They believed that the disgruntled investors would force them to sell off all their assets and that the unsecured creditors had a right to a share, if they so elected. However, when Ron and Sue approached the creditors, they also explained their total financial situation and indicated that the sale of all their assets would yield only a small fraction of the total debt. They then asked each creditor not to join the bankruptcy action on the promise (in writing) that they would repay all debts in total at a future date, if the Lord chose to provide the funds.
