From reader Detox, we get news that Benny Perez's church has filed for bankruptcy in Las Vegas. Benny Perez is the pastor of The Church at South Las Vegas and is Judah Smith's brother-in-law. Which, you know, makes this story that much more delightful.
Here are the details:
The Church of South Las Vegas paid $4.5 million for 3.3 acres of Las Vegas Valley land three years ago. In March, that land appraised for $475,000—a 90 percent decline. The church owes a combined $7.7 million on the property and land. It appraised for $2.3 million. So, like many property owners in Las Vegas—one of the hardest hit real estate markets in the nation—Perez is upside down … $5.4 million upside down.
And Benny's justification:
All I know is that for us as a church, it is a stewardship issue. Would you keep throwing thousands of dollars into a black hole? The bank wants to milk our savings and everything we have until we can’t pay anymore. Bankruptcy was a business decision.”

Ha! IT IS ALL A BUSINESS DECISION! From the color of the carpet, to the size of the pews, to the attractiveness of your associate pastors, every decision you make, Benny, is a business decision. But hey, at least you finally admit it.
For me personally, the decision to strategically default raises a few issues. (To those who are unaware: A strategic default is one where you refuse to pay your loan even though you have the income to pay the loan. This is different from a traditional default, where you simply do not have the money to pay the loan. Benny can pay his loan to the bank, he just does not want to.)
Legally speaking, as long as the church filed the proper paper work and got a judge to sign off on the bankruptcy then they are operating completely within the law. Of course, when the bank forecloses and takes the church, the bank will be operating completely within the law as well.
From a practical side, I tend to think the strategic default was probably a smart move. The church property and building were unlikely to ever appreciate to the levels at which they were purchased. Thus, defaulting on the loan will likely end up saving The Church at South Las Vegas millions of dollars in the long run. Now, if the church loses the building and it destroys the church in the process, then this will not look like such a smart decision.
From a moral perspective, I am kind of torn. Do you have a moral obligation to continue to honor a contract as long as you still can? Benny Perez could continue to pay his loan, he just felt it was in his financial best interest to default. He broke a contract. It is one thing to default if you simply cannot pay, and you are doing your best to pay. It is another issue entirely to stop paying a loan, simply because you want to use the money for something else. Does Benny Perez have a moral obligation to uphold his contract? I honestly do not know. It all comes down to how you view contracts. Are they simply financial transactions or is there an element of morality involved. Before the housing crisis, I would have argued that everyone should continue to honor their contracts with the bank as long as they could continue to pay the mortgage. However, after the housing crisis and seeing the way the banks behaved, I am beginning to believe that there is no moral aspect in dealing with banks.
And of course, the $64,000 question is how long before City Bible Church files for bankruptcy. It may never happen, but I would almost guarantee that the discussion has been had.