In Ancient Greece Bankruptcy did not exist. If a debtor could not repay the money he owed, then he, his family and his own servants were forced into “debt slavery” until the creditor recovered the losses through their physical labor. While “debt slavery” is far from the bankruptcy we know, the Greeks did begin to set limitations on these labor repayments. In many city-states of Greece, debt slavery was limited to a five year period and debt slaves were not allowed to be harmed or killed. Unfortunately, for the debtor’s servants, their servitude could last much longer and they were often forced to remain with their new lord for life.
The idea of bankruptcy, while not formally established until 1542, started to appear in both the Old Testament of the Bible and in the Qur’an. The Old Testament stated that every seventh year was a Sabattical year and all debts were to be released within the community. The Qur’an stated that debtors should be given time to repay their debts, and is stated in verse 280, “if someone is in hardship, then let there be postponement until a time of ease.” The idea of bankruptcy was also seen in East Asia, under the reign of Genghis Kahn. His “Yassa,” or code of law, mandated the death penalty for any man with three bankruptcies.
Bankruptcy Law was formally established in 1542, in England, when the Statute of Bankrupts was enacted. This Act was created to prevent fraud against the creditors, and could not be filed be a debtor. This Act was also The Act was simple and directed that debtors would have their possessions taken and sold to repay their debts. The word “bankruptcy” comes from the Latin “bancus,” bench and “ruptus,” broken. A “broken bench” symbolized a broken business in the marketplace.
In the United States, Bankruptcy Laws were enacted in response to poor economic conditions and were usually temporary. The first official bankruptcy law was enacted in 1800 in response to land speculation, but was repealed just three years later. This happened again in 1841, when the second bankruptcy law was passed in response to the panic of 1837. It, too, was repealed, just two years later. In 1867 Congress passed another bankruptcy law after the Civil War, which was repealed in 1878. The first two laws allowed for a minimal discharge of debts, and the last law did allow for corporation protection.
Finally in 1898 the Bankruptcy Act became permanent and is more similar to the bankruptcy we know today. Before the 20th century, bankruptcy favored the creditor and focused on recovering any debts. Bankruptcy law continues to be amended and focuses more on reorganizing debt and less on punishing the debtor. Visit our Killeen and Waco bankruptcy attorney blog to learn more interesting facts about bankruptcy.
Jeff Davis is the Owner of the Davis law firm, and a highly experienced Killeen and Waco bankruptcy attorney. To find out more information about a Killeen or Waco bankruptcy lawyer, please visit www.jeffdavislawfirm.com.