Many people see being bankrupt as a sign of someone’s financial failure. It is, however, the only option for many people to save some of their property. The problem that a lot of people face when they are filing for such a credit solution is the shame and humiliation that comes with it. Although this is perfectly understandable, the truth is, one should not feel ashamed of taking what might be their only option to save whatever they can from their property or relieving themselves of dire financial stress.
Bankruptcy Laws in Ancient Times
Upon doing some research on the practice of filing for bankruptcy, one will find that it can be traced all the way back to the Old Testament. That long ago, there were already laws the specifically stated that all debt should be eliminated after fifty years. The concepts of debt and debt elimination already existed. In fact, the Hebrew Law of Forgiveness states that all debt should be eliminated after seven years.
In more modern times, bankruptcy law was first enacted in England during the year 1542. At that time, however, the law was developed as a financial remedy for creditors and not debtors. Collusive bankruptcy did not exist and laws gave creditors the right to seize the assets of debtors who could not meet their financial obligations. Seized assets did not serve to cover existing debt. In fact, upon being stripped of all assets, debtors were imprisoned until such time that their families were able to pay their debts.
Over time, laws in England improved but remained, for a number of years, in favor of creditors. By 1825, such a financial taking become something that was agreed upon by both debtors and creditors. Then, by 1849, voluntary bankruptcy was authorized by lawmakers.
Bankruptcy in the United States
In the United States, the subject of bankruptcy made its way to federal laws only in 1800 but it was not until the development of the Bankruptcy Code or the Bankruptcy Reform Act of 1978 did laws become what it is today. Although many changes have been made to the code since it was first enacted, it remains to be the country’s statute law that governs this legal declaration.
Among the most substantial amendments to the Bankruptcy Code is the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which was made effective in 2005. That amendment made it more difficult for debtors to qualify for debt relief and, therefore, also made it more difficult for people to game the system. Furthermore, it has made the code fair to both debtors and creditors.
Bankruptcy laws have existed around the world for centuries. While it is perfectly normal for those who have used this process as a credit solution to feel ashamed of their situation, they should also understand that laws are there to, somehow, protect them.