Morally bankrupt? Most religions condemn debt

The holidays are history; the gifts are tucked away, and it's time for reckoning with your credit card statement. January is here again.

It just doesn't seem that long ago, carrying all those bags out of the mall and rationalizing that you'll eat only ramen this month so you can pay it all off by Feb. 1. Besides, your other New Year's resolution is to lose some weight.

Yet research shows the majority of Americans won't keep either of those resolves, despite the fact that both debt and gluttony are condemned by most major religious traditions. In fact, says certified financial planner Michael Cook, lenders count on our collective lack of resolve when it comes to paying down debt.

A member of St. Thomas More Catholic Parish, Cook is convinced lenders are not acting morally or ethically by lending people money they can't afford to repay, and by encouraging them to go deeper in debt. Statistics released this month show the average U.S. household has $18,700 is consumer debt alone -- excluding home mortgage or rent payments. And the average credit card balance per household? $12,000.

"I see lots of people out there with very good incomes -- doctors and attorneys -- that have tremendous debt problems. And it continues because material things seem to be important to them to feel fulfilled. I'm not sure why that is, but spiritual teachings (about debt) are only given lip service."

Jessie Fan, associate professor of Family and Consumer Studies at the University of Utah, says people's attitudes about consumption, and therefore debt, have definitely changed over time. Borrowing "has become more acceptable; it's not a shame anymore."

Earlier generations didn't want their neighbors to know they were borrowing money, and bankruptcy carried a particular stigma. Now "young people think it's not a big deal compared to older people."

Though Cook doesn't talk religion with clients unless they bring it up, he does teach them about "good and bad debt."

"Even from a spiritual point of view, good debt to me is anything that is useful in life that appreciates, like your home. And it's usually tax deductible." Bad debts, in Cook's estimation, include home equity loans, cars, credit cards and anything else that depreciates in value or can't be deducted.

In addition to losing value over time, bad debts incur interest and fees -- often at exorbitant interest rates. In 2002 alone, Cook said, the average consumer paid $1,700 in interest and fees on consumer debt. "You have nothing to show for that" other than the fact that you didn't have to wait to satisfy your desire for the item, he said. He sees people "highly focused on what you would call 'worldly wealth' and just having to have it all."

Utah State University professor Jean Lown agrees.

When word hit the national media that Utahns file for bankruptcy at a higher rate than residents of any other state, she co-authored a study on the problem with colleague Barbara Rowe. It includes "lots of numbers on who has filed but not why," though she has talked with thousands of students in her 20 years of teaching financial management at USU, so she can make some educated guesses.

The most interesting finding in her study, she said, was the "very very high rate of failed Chapter 13 filings" in which debtors agree to a proposed repayment plan. Only about 24 percent of Utahns who file Chapter 13 actually repaid their debts within a five-year period; most of the others sought discharge of debt through Chapter 7, she said.

While there has never been an nationwide study on what percentage of Chapter 13 filings are successfully resolved, regional studies in other areas show a 30 percent to 35 percent completion rate.

The dismal completion rate is combined with the fact that "a very high percentage of people who file (initially) choose Chapter 13" since the bulk of bankruptcy filings in other areas are Chapter 7. "Whether they choose to do that or are encouraged to do so is questionable." Lown said she simply doesn't know if moral obligation or religious affiliation have anything to do with the choice, because such questions were not a part of the study.

But she said it may well be that people who file Chapter 13 and take care of debts that won't be forgiven -- such as mortgage payments, taxes, child support or alimony payments -- end up filing Chapter 7 later on. They may be asking themselves, "Why should I keep making these payments? People know I've filed and most have written me off. It's not going to haunt me if I get rid of it."

Some question whether debt and bankruptcy are even considered a moral dilemma in 2004.

Yet Christianity, Judaism, Islam, Hinduism and Buddhism all offer specific teachings about the stewardship adherents have regarding money and fair dealing. In Utah and throughout the world, members of The Church of Jesus Christ of Latter-day Saints are constantly cautioned by top church leaders to avoid debt. That the state, with its majority LDS population, has the highest personal bankruptcy rate in the nation is not lost on church leadership or observers.

Lown, who is not LDS, moved to Utah 20 years ago and said she was "astonished" early on when a student brought an article on debt from the LDS magazine, "Ensign," to class. It had 10 suggestions for dealing responsibly with money, "and all 10 things were congruent with the personal finance texts I'd been using. I was surprised at how conservative attitudes were regarding debt" back then. Yet it is that same generation of baby boomers who were reading the advice who are filing bankruptcy in such large numbers now, she said.

"It seems so puzzling. I'm concluding that Utahns are as susceptible to the pressures of advertising as people elsewhere. Maybe it's even worse here, because people know so much about their neighbors and where they work." She believes when people visit each other's homes, they may be thinking, "They have all this stuff, and why can't I have it, too? They don't make any more than I do."

A cultural expectation of being successful may figure in as well. "From talking with LDS people who have been fairly straightforward with me, I've been told you don't get to be bishop if you're a financial failure." Another observation is the "expectation that if you're a good Mormon" and pay tithing, "you will be granted financial success and everything will be taken care of."

The observation comes in part from conversations with students, including one years ago who was in her 40s, and was a "very faithful Mormon."

"She felt some of her LDS neighbors looked down on her and her (graduate student) husband because they didn't have much money, they were renting a house, and they weren't as financially successful as they were supposed to be."

Lown's assumptions are born out by some pervasive LDS myths, according to Paul Godfrey, associate professor with Brigham Young University's Marriott School of Management. A group of his students interviewed 27 Latter-day Saints in Utah County last year, asking specific questions about informal messages they had gathered from LDS culture or from unofficial church sources regarding financial management.

Several responses were given repeatedly, he said, including the following: "you'll make more money if you don't work on Sunday," "if you pray for riches you will be rewarded with riches," "if you pray for riches you will never be rich," "if you live righteously you'll be rewarded with riches," "because I pay tithing everything will be OK," "if you have children, God will provide the means to support them," "filing for bankruptcy is dishonest" and "investing in the stock market is gambling."

While he doesn't believe the sentiments necessarily reflect the actions of local members, he senses "there is a certain subset of church membership that's very receptive to believing messages like this." Why? "Because they're looking for excuses to justify their financial behavior." Godfrey said he has known Latter-day Saints who make major purchases "without even running the numbers" because they've adopted the philosophy that if they're "living right and paying tithing, everything will work out just fine."

Even so, Godrey said, "the vast majority of LDS people I know would certainly temper all these myths with a hard dose of reality."

Among the most widespread myths among Latter-day Saints, he said, is that financial well-being is a sign of righteousness.

"I believe it to be utterly false but I believe it's also fairly pervasive." That, combined with Lown's assessment of how much information Latter-day Saints have about their neighbors, "contributes to people making financial decisions beyond their means," Godfrey said.

When applied to the state's dubious bankruptcy ranking, Godrey said he doesn't believe it's "the causal, smoking gun, but I think it's one thing that sets Utah apart" from other states -- mostly in the Bible Belt -- that are also near the top of the bankruptcy chart. While no statistics are available, Godfrey believes Utahns who file bankruptcy closely mirror the state's religious demographic.

Fan has done research on consumption, saving and borrowing. She has no research regarding religious affiliation and its relationship to debt, but has wondered if there is some connection between the bankruptcy rate and the dominant LDS culture.

The U. won't approve a research study that includes questions about people's religious preference, she said. "It definitely hampers our ability to understand what's happening. All you can do (regarding faith questions) is just speculate."

Social status and spending do have some correlation, according to a recent study of 400 U. students that Fan and colleague John Burton compiled last year. Survey respondents agreed that clothing, vacations, Palm Pilots and laptop computers, furniture, luxury cars and sports utility vehicles all elevate social status.

The survey results are being used to conduct more detailed research on "status consumption" and its relationship to financial management problems, Fan said.

"We wanted to know whether status consumption -- also referred to as conspicuous consumption, social display or positional goods -- played a role in debt and bankruptcy and the reasons why. We wanted to know if people were going into debt to pay for luxuries or to put food on the table."

The majority of respondents were Caucasian, worked part time, lived with their parents and had a family income of more than $40,000. They said if they had a "little extra money," defined as between $1 and $999, and wanted to convey status through general commodities, they would buy clothing, take a small vacation or invest in a Palm Pilot -- in that order. If they had between $1,000 and $9,999 and wanted to convey status, they would purchase laptop computers, take a moderate vacation and purchase furniture.

If they had "a lot of extra money," more than $10,000, they would buy new, larger homes and luxury cars or SUVs. Students also ranked other items they considered as status conveying, which included cell phones, fine dining, hot tubs/Jacuzzis, large screen high-definition TVs, boats and luxury vacations.

In an earlier study, Fan set out guidelines for things that would be considered luxuries, such as travel, and those considered necessities, like food. "Luxury" items like a heated towel rack in the bathroom are not always particularly expensive, she said, but "if you have a low income you don't think about buying that." The study found that "people who borrow money do spend more on luxury goods compared to people who don't borrow."

Cook is convinced that from a spiritual perspective, debt "just eats you alive."

"I think people want to be outwardly rich rather than inwardly rich, and to me that's the key. People have a choice every single day. The Bible says you can't serve God and money, but people try to do both somehow. I think where your treasure is there your heart will be also."

Michael Cook can be reached at cookm@networld.com. Information and calculators for questions regarding mortgage interest and prepayment, the cost of sending a spouse to work, credit card interest and budgeting can be found online at www.cfcministry.org under the "tools" tab.

E-mail: carrie@desnews.com

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