A Jewish Law Perspective on the Propriety of Discharging Personal Debts¹

Prof. Steven H. Resnicoff
DePaul University College of Law

Amidst allegations of extensive abuse, society is rethinking the appropriate parameters of personal bankruptcy law. Commentators espousing diverse political, moral or religious principles alternatively affirm or deny the underlying desirability of discharging a person's liability for her debts. As both an ordained rabbi and a professor teaching bankruptcy law, I have been asked to discuss this issue from a Jewish law orientation. In this essay, I briefly² argue that the spirit of Jewish law would not encourage the availability of a bankruptcy discharge even though, as I have argued much more rigorously elsewhere, modern Jewish law would, at least in most instances, acknowledge the validity of a United States bankruptcy discharge.³

You may ask, "What do you mean by 'modern Jewish law'"? So I'll tell you. Jewish law is not a mere enumeration of particular precepts laws found in the Old Testament (the "Torah"), but a jurisprudential system of rules that - pursuant to authorization found within the Torah - evolve through rabbinic enactments, the establishment of commercial customs or the operation of conflict of law precepts that validate certain types of secular laws. Consequently, any effort to describe precise provisions of Jewish law must be made in connection with a specific time and place.

In any event, it is useful to begin our discussion with the debtor-creditor laws derived directly from the Torah. These rules provided important protections to debtors not readily available in other ancient legal systems. Commercial debtors, for instance, could be neither imprisoned nor subjected to involuntary servitude.⁴ Similarly, creditors were enjoined from other oppressive collection tactics. Secured creditors, for example, were precluded from entering a debtor's home to seize collateral. In addition, certain properties - such as particular tools of one's trade - were altogether exempt from collection.

Despite such pro-debtor laws, the Torah did not call for an American-style bankruptcy discharge. In fact, the obligation to repay a debt was regarded as an affirmative religious commandment. The one Torah law that is sometimes characterized as a bankruptcy discharge is the relief from indebtedness - known as "debt cancellation" - granted at the end of every seventh year.⁵

The scope of this relief, however, was substantially delimited. It applied only to unsecured financial obligations that were in the nature of an indebtedness on a loan. Thus, it did not ordinarily relate to a duty to pay wages to employees or to pay for credit extended by merchants.⁶ Nor did it apply, for instance to thieves' restitutive debts, to obligations to return usury, to debts not yet collectible before the end of the seventh year, to judgment debts (even if a judgment did no more than order a debtor to pay a loan), or to debts turned over for collection to rabbinic courts.

In addition, the purpose for debt cancellation under Jewish law differs from that of a secular bankruptcy discharge. A Jew was entitled to benefit from debt cancellation even if she were rich and even without losing control over her non-exempt assets. Instead, debt cancellation seems to have been part of an overall process of renewal designed to remind man of the existence of G-d and of G-d's ownership of the world and of everything in it. Jewish debt cancellationthus helps to demonstrate that man's ownership of property and the consequences of man's actions are of only transient significance. This same theme seems to be related to the rules relating to the Jubilee year, the 50th year, in which slaves were emancipated and certain real estate was returned to their original owners.

Even if the original rule of debt cancellation were construed as a type of bankruptcy discharge, subsequent Jewish law developments indicate that it is disfavored. The sages, believing that the debt cancellation rule deterred creditors from lending money, formulated a procedure that made it extremely easy to turn a debt over to a rabbinic court for collection and, thus, immunize the debt from the debt cancellation.⁷ Similarly, a number of Talmudic sources made it clear that even if debt cancellation applied to a debt, one is strongly urged to pay it⁸ - and this sentiment has continued to be expressed by rabbinic authorities ever since. For much the same reason, various post-Talmudic Jewish law authorities promulgated diverse anti-creditor ordinances designed to increase the availability of credit.

Jewish law has always emphasized that the payment of a debt is a religious obligation. The principle of debt cancellation, which was always of limited in scope, was not really inconsistent with this concept. Rabbinic enactments have effectively vitiated the impact of debt cancellation and have curtailed - rather than expanded - debtors' rights generally. Consequently, it seems that modern Jewish law would not encourage the availability of a bankruptcy discharge.

Nevertheless, Jewish law does recognize the effectiveness of commercial custom and, as to some matters, secular commercial law. The role played by custom and secular law is complex and would exceed the purview of this essay. As I have explained elsewhere, however, these factors would probably cause Jewish law to recognize the validity of an American bankruptcy law discharge.

Footnotes

1. Copyright 1998 by Steven H. Resnicoff. All rights reserved. This article first appeared as Viewpoint: A Jewish Law Perspective on the Propriety of Discharging Personal Debts, in Bankruptcy Court Decisions: Weekly News and Comment (February 3, 1998), pp. A3-A4.

2. Alas, space constraints prevent a more elaborate treatment that would enable me to showcase even a small sample of Jewish law's sophisticated commercial relations law.

3. See Steven H. Resnicoff, Bankruptcy Law - A Viable Halachic Option? XXIV Journal of Halacha & Contemporary Society 5 (Fall 1992).

4. Thieves, on the other hand, could be forced to work off restitutive obligations. See, generally, Menachem Elon (ed.), The Principles of Jewish Law (1975), columns 622-624.

5. See Deuteronomy 15:1-2. Incidentally, the Torah law regarding this cancellation of indebtedness only applied when the laws regarding the Jubilee Year were in effect. According to Jewish law authorities, the latter are in effect only when a majority of Jews live in the land of Israel.

6. See, generally, Rabbi Yisroel Reisman, The Laws of Ribis (Mesorah Publications 1995), pp. 357-371.

7. See Elon, supra, note 3, columns 76, 267; Reisman, supra, note 5, p. 365-371.

8. See, e.g., Babylonian Talmud, Gittin 37b.