Bankruptcy History

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"Regardless of where you are at now, remember, you are not ALONE and you are not the FIRST person to come unto difficult times and severe financial hardship. Knowing when its time to pick yourself up and take back control is what will make the difference in the outcome." Linda M. Tirelli, Esq.

History of Bankruptcy............

Believe it or not, Bankruptcy has been around for well over four hundred years.   The Roman's have the first written history on the subject.  Interestingly, the word "bankruptcy" derives from the Latin term describing a "broken bench."   “Bancus”, was the word for a tradesman's countertop or table, and “ruptus,” is the word for “broken,” referring to one whose business was either broke or gone.  Back in those days, a tradesman unable to pay his creditors' claims literally had his bench broken which put him out of his misery by putting him out of business all together.

Thereafter, it was common practice to imprison debtors in what is known as “Debtor’s Prison.”  Debtors would be sentenced to a miserable existence in a dungeon until their family and friends could pay off the debts.  This would often take years and moreover, result in the family forced to live in the streets begging for food and money.  The practice did little for actually repaying creditors other than to shame the family.

As history indicates, some time around 1833 the practice of imprisoning debtors who were unable to pay their obligations was eliminated at the federal level in the United States.  Most States followed suit.  In our civilized society, the government has no interest in tossing families into the streets.  In fact, this would only result in the government having to support the family further draining the welfare resources.  Major reform evolved and Bankruptcy Courts protect debtors from their creditors and impending doom by offering a clean fresh start to those who qualify.  In turn this practice has also encouraged creditors to work out settlements and negotiate debts before they mushroom out of control.

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 in Congress was enacted in 2005. 

Bear in mind that while there is no Debtors’ Prison, there are laws which can land you in prison for nor paying certain debts.  Debts of fraud, child-support, alimony, or release fines can land you in jail or prevent you from being released from it.  Play by the rules and hire a responsible bankruptcy lawyer to guide you through the do’s and don’ts of  bankruptcy protection.

Garvey Tirelli & Cushner Ltd.
50 Main Street Suite 390
Wite Plains, NY 10606
(914)946-2200

 


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