The Law Offices of Ken McCartney P.C.

History of Bankruptcy

 

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I frequently ask my new clients how often that they believe they can file bankruptcy.  Many many times the response is seven (7) years.  I puzzled over this misconception for 29 years and finally a college in Fort Collins matter of factly pointed out, " oh, that comes from the Bible."

    Sure enough, in the book of Deuteronomy,  Chapter 15, Verses 1-2,  Mosses brings home God's law from the the mountain with the burning bush to the Israelites and counsels them to forgive debts every seven years.  Amazingly enough he also describes a system of redemption after foreclosure that is very similar to those in effect today. 


    Bankruptcy has been around for over four hundred years.   The Roman's have the first written history on the subject.

    The word "bankruptcy" is believed to originate from ancient Latin verbiage describing a "broken bench," bancus, the tradesman's counter, and ruptus, broken, denoting one whose place business was broke or gone.  A tradesmen in the square who could not pay creditors' claims literally had his bench broken which put him out of his misery. 


    In 1833 the practice of imprisonment for debts was eliminated at the federal level in the United States.  Most States followed suit.

    Today, it is still possible to be thrown or remain in jail for debt.  Debts of fraud, child-support, alimony, or release fines can land you in jail or prevent you from being released from it.

    Early United State bankruptcy law required a certain percentage of debt be repaid in order to gain a discharge.  Fortunately both concepts are past. 


    The current federal law which is referred to as the Bankruptcy Code, replaced the Bankruptcy Act in 1979.  "The Act" originated in 1898, as the Chandler Act, and became the  Wagner Act after depression era amendments.   There have been several amendments to the current Bankruptcy Code since 1979, and sweeping reform is pending in Congress expected to be enacted in 2002. 


The largest amendment to the Bankruptcy Code since its 1978, enactment became effective for the most part on October 17th, 2005.  This remarkable bit of legislation took Congress over 500 pages of print and effects all cases filed after the effective date.  Much of this web site is being updated to take the changes this law brings to the business. Click here to see more about this remarkable legislation.

 

 

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