Should Christians File for Bankruptcy?

Should Christians file for Bankruptcy? As a Christian, I had to wrestle with this issue before deciding to take on my very first bankruptcy case back in 2004. I prayed and researched this issue and found what the Bible has to say about bankruptcy in the following scripture:

Bible-e1369243987486Deuteronomy 15: 1-6. The Year for Canceling Debts.

At the end of every seven years you must cancel debts. This is how it is to be done: Every creditor shall cancel the loan he has made to his fellow Israelite. He shall not require payment from his fellow Israelite or brother, because the Lord’s time for canceling debts has been proclaimed. You may require payment from a foreigner, but you must cancel any debt your brother owes you. However, there should be no poor among you, for in the land the Lord your God is giving you to possess as your inheritance, he will richly bless you, if only you fully obey the Lord your God and are careful to follow all these commands I am giving you today. For the Lord your God will bless you as he has promised, and you will lend to many nations but will borrow from none. You will rule over many nations but none will rule over you.

New International Version.

Similar to many of our laws in the U.S., the Bankruptcy Code parallels Biblical instructions with directions for cancelling indebtedness. Prior to the changes in the Bankruptcy Code in 2005, you could receive a Chapter 7 discharge of indebtedness every 7 years. That has since been changed to every 8 years, but the underlying principal of debt forgiveness remains.

It is clear that God never intended His people to live under the stress and hopelessness of crushing debts. Obviously, He didn’t intend for this principal to be abused by racking up debts that you never intend to repay, but it is contrary to His Word to believe that bankruptcy is wrong. In His mercy, it was provided as a blessing for His people so that they could receive a fresh start. We should not just embrace the parts of His Word that talk about the abundance He wants us to have, but rather we should embrace His whole Word including those passages that provide for hard times and His way out of them.

Why Every Small Business Should be Incorporated

Every small business should be incorporated as a separate legal entity by forming either a corporation, an S corporation, or an LLC. A sole proprietorship is not a separate legal entity apart from the individual business owner and is a very dangerous business choice. As a sole proprietor, there is no limitation to your personal liability for business dealings, which means that liabilities, debts, and judgments against the business can attach to the personal assets of the sole proprietor including personal bank accounts, cars, and homes. Limitation of liability is the primary benefit of setting up a separate legal structure for your business and it is a must for every business venture.

Posted by Suren G. Adams, Adams Law Office, LLC

The Benefits of a Trust

There are numerous benefits of creating a trust as your primary estate planning tool. Different kinds of trusts can help you avoid probate, reduce estate taxes, or set up long-term property management for you and your family, including family members who are minors or have special needs.

A revocable living trust (“RLT”) is a separate entity created for holding title to property for the benefit of a beneficiary. A revocable living trust is just that – revocable and changeable by the person who created it. A “living trust” (also called an “inter vivos” trust) is simply a trust you create while you’re alive, rather than one that is created at your death.

With a revocable living trust, you, the property owner are the Settlor, who creates and can amend the trust, the original Trustee, who manages and distributes the property held in trust, and the beneficiary until death, at which time, a Successor Trustee transfers the property to the successor beneficiaries. Control over the property remains with the owner(s) during life and the transfer of property after death occurs without probate.

One of the primary advantages of creating a living trust is that property left through the trust does not have to go through probate. In a nutshell, probate is the court-supervised process of paying your debts and distributing your property to the people who inherit it. The average probate takes 7-12 months before distributions are made. Property you transfer into a living trust before your death does not go through probate. If you have property in more than one state, a trust can eliminate the need for probate proceedings in multiple jurisdictions. The successor trustee — the person you appoint to handle the trust after your death — simply transfers ownership to the beneficiaries you named in the trust according to how you stated in the trust agreement. In many cases, the whole process takes only a few weeks. When all of the property has been transferred to the beneficiaries, the living trust ceases to exist.

A simple probate-avoidance living trust has no effect on taxes. More complicated living trusts, however, can greatly reduce the federal and/or state estate tax bills for people who own assets above the estate tax exemption. If your estate, including life insurance, is sizable and over the estate tax exemption amount ($1,000,000 for the Maryland estate tax and $5,250,000 for the 2013 federal estate tax), a credit shelter trust can save your beneficiaries tens of thousands of dollars in estate taxes. This specific tax-saving trust is designed primarily for married couples. It is also commonly called an “AB trust,” an “exemption trust,” a “marital life estate trust,” or a “marital bypass trust.” Each spouse leaves property, in trust, to the other for life, and then to the children or other beneficiaries.

Another benefit of a trust is that it is a private document. A will becomes a matter of public record when it is submitted to a probate court, as do all the other documents associated with probate — inventories of the deceased person’s assets and debts, for example. The terms of a living trust, however, need not be made public.

Some other benefits of trusts are that a trust can allow for great specificity with regard to distributions for beneficiaries, asset protection, retirement plan distribution planning to limit income taxes, provisions for special needs children, blended family planning, and provisions to prevent guardianship.

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