Despite the somewhat negative connotations that some people associate with bankruptcy, this type of consumer protection has been in existence since at least the time of the Greeks. This indicates that societies have nearly always recognized that sometimes, the best choice for the individual and for the community is to declare bankruptcy and start over with a “clean slate.” The following is a brief account of the history of bankruptcy; an approximate time span of nearly 4,000 years.
Bankruptcy among the Greeks
When Greece was the world’s leading military power and cultural center, only men could become debtors. But when a man became insolvent and could no longer pay his debts, he could be forced into indentured servitude for years in order to repay his debts – often under deplorable conditions.
However, because women, children and slaves were considered the property of men, they could also be sold into slavery or indentured servitude. This means that going bankrupt could literally cost a man his entire life including his family.
Bankruptcy among Romans
Two thousand years later the term bankruptcy is theorized to have been born in the form of its earliest Latin ancestor for the words “broken bench.” During this time, lenders often operated from a public bench that would be broken in the event the lender went bankrupt. This is the equivalent of a modern “out of business” sign.
Unfortunately, Romans often jailed or tortured people who were unable to pay their debts, and many were sold into slavery or traded for property, cash, influence or power.
Spain’s National Bankruptcy
Spain became the first country to officially go bankrupt. This occurred under the rule of Phillip II as he presided over one of the darkest periods in human history: the Spanish Inquisition. The Inquisition brought in a lot of money, but it was also hemorrhaging money as well, and with Phillip’s blundering expansionist nature, it wasn’t long until the entire country was overextended and unable to repay its debts, declaring a series of bankruptcies in the middle of the sixteenth century.
Other countries would follow over the next two hundred years, including France and Russia. (Wikipedia entry for Sovereign Default. Accessed 07/20/2012)
Bankruptcy in Early America
The Revolutionary War bankrupted the newly founded America, but the country quickly recovered and for many years thereafter took a dim view to bankruptcy. Consumers and businesses that went broke were often subject to ridicule and even criminal charges and jail time.
1898 Bankruptcy Act
Numerous bankruptcy laws and acts were passed between the end of the 1700’s and 1898, when corporations were officially extended bankruptcy protections and the basis for most modern bankruptcy laws were put into place by congress.
Bankruptcy Act of 1938
This Act expanded significantly upon the 1898 Act, most importantly improving the voluntary status of petitioners and the appointment of trustees to handle bankruptcy cases.
1978 Bankruptcy Reform
This Act made bankruptcy far more attractive to people and businesses struggling with debt. The Act spelled out the numerous bankruptcy types that we know today, including Chapter 7 liquidation and Chapter 13 reorganization – the two most common types of bankruptcy.
A lot has changed with bankruptcy over the years, but one thing that hasn’t changed is the fact that if you’re drowning in debt and you need help, bankruptcy may be the right choice for you. Find out for yourself right now with an immediate, free consultation from an expert with our Pittsburgh Bankruptcy Firm. Call the number at the top of your screen and learn more about taking advantage of consumer protections that were set aside to help people in financial distress. Don’t wait – make the call now.