Have you ever wondered how bankruptcy first started and how its processes and laws changed through history? Whether you want to debunk certain bankruptcy myths, understand the most common terms and expressions, or get familiar with it because you want to file a petition, learning about bankruptcy may come in handy.
Keep reading to find out more about the evolution of bankruptcy before hiring a reputable debt attorney in San Diego, CA, and getting a fresh start.
How has bankruptcy evolved over the years?
The word bankruptcy has its roots all the way back in ancient times. There’s a theory that it came from Latin – bancus (meaning bench or table) and ruptus (meaning broken). Supposedly, there was a banker who ran his business on a bench. Once he was no longer able to lend money and close deals, his bench was broken to signify his failure.
To get to the present-day bankruptcy laws and practices in the U.S., we’ll start in England.
First bankruptcy laws in England, 1542
The first official bankruptcy law in England was introduced in 1542. If someone went bankrupt, they were considered a criminal and they were punished. The individual would either go to prison or receive a much worse punishment. However, in the 18th century, things took a more positive turn. The new law allowed debtors to only pay what they could and the unpayable debts would be discharged.
The U.S – Bankruptcy Act of 1800
Due to the financial crises, the first bankruptcy law was passed in the U.S. in 1800. It was similar to the one in England. Only merchants were able to undergo bankruptcy and it could only be involuntary bankruptcy. Even then, the law favored the creditor, so it was difficult to get your debts discharged. Only three years later, this law was repealed.
Bankruptcy Act of 1841
After another financial crisis, the Congress passed a new Bankruptcy Act in 1841. This time, anyone including merchants could be debtors in bankruptcy, and they were allowed to initiate a bankruptcy case. This act still allowed minimal discharge of debt and creditors also believed the law provided them few payments. So, the law was repealed in 1843.
Bankruptcy Act of 1867
Starting with the passing of this Bankruptcy Act, all individuals and now corporations could undergo voluntary and involuntary bankruptcy. Registers in bankruptcy were appointed to assist the court. They were similar to the modern-day bankruptcy judge. Also, what we now call a trustee was an assignee. Finally, for the first time, a debtor was able to claim state law exemptions. The Act of 1867 was in place for 11 years.
Bankruptcy Act of 1898
This Act was more oriented toward debtors as it allowed more generous discharge. In general, bankruptcy cases were handled more efficiently. With various changes and amendments, this law did not sustain a repeal.
The Bankruptcy Act Reform of 1978
The Reform Act of 1978 brought about numerous changes to bankruptcy rules and practices. Bankruptcy judges presided over cases of eligible debtors. The debtors could initiate their cases under Chapters 7, 11, 12, 13, and 15. They had to meet specific requirements to be granted a debt discharge. The act was altered and improved upon in 2005 introducing financial management training, the Means Test, and more.
Which debt attorney in San Diego, CA should you hire?
Regardless of your reasons for filing for bankruptcy, the experts at Bankruptcy Law Offices of Mark L. Miller are at your service. Our experienced attorneys specializing in debt and bankruptcy matters will assist you on your way to financial freedom.
Let us handle your case with care and expertise so that you can soon enjoy some stress-free time at La Jolla Cove perhaps. Feel free to reach out to us and set up a free consultation!