History of Bankruptcy Laws
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History of Bankruptcy Laws

The history of bankruptcy laws offers a glimpse into the changing social norms that created today's stigma-free process through which people may eliminate their debts.

Bankruptcy laws originated in England hundreds of years ago, and were eventually exported into American courts.

In fact, with an eye towards English bankruptcy laws, the United States Constitution gave the legislature express power to enact "uniform laws on the subject of bankruptcies." This power was first used by Congress in 1800.

U.S. Bankruptcy Laws: A Brief History

In 1800, Congress passed the first American bankruptcy law, which closely mirrored old English rules governing debt relief. Since then, however, bankruptcy laws have changed a great deal.

Some of the most important changes in bankruptcy laws have included:

  • Bankruptcy Act of 1841. This marked the first time debtors were able to voluntarily file for bankruptcy and receive a discharge of their debts. Before this Act, creditors held the keys to bankruptcy. Sources suggest that this law created the first "modern" form of bankruptcy.
  • Bankruptcy Act of 1867. While this was later repealed, it did create state exemptions to federal bankruptcy cases, allowing debtors to keep valuable property out of the hands of creditors during and after bankruptcy.
  • Reform Act of 1978. This Act, also known as the Bankruptcy Code, still governs bankruptcy law today. A key part of this Act was the strengthening of Chapter 13 bankruptcy, which is designed to help wage earners repay and discharge their debts.
  • 2005 Bankruptcy Code Amendments. These new bankruptcy laws created the means test for Chapter 7 bankruptcy, which limits Chapter 7 to people with limited income. The new laws were also intended to reduce bankruptcy fraud and abuse.

While bankruptcy laws have been amended numerous times in our country's history, their primary purpose has never wavered. These laws are intended to help hard-working people eliminate some or all of their debts, allowing them to restart their financial lives.

Take Advantage of Bankruptcy Laws

While bankruptcy laws have a long and storied history, they remain more relevant today than they have ever been before. For example, through Chapter 7 bankruptcy, a filer may be able to eliminate:

In addition, Chapter 13 bankruptcy provides debt relief for people who have steady employment. By filing for Chapter 13, filers may be able to stop home foreclosure or prevent their car from being repossessed.

To learn more about the bankruptcy process, contact a local bankruptcy lawyer today. You may also fill out the brief form below to connect with a lawyer in your area for a free consultation.

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