Thursday, October 17, 2013

An Abbreviated History of Bankruptcy Law, Part. I

After the article by Charles Jordan Tabb
     Bankruptcy has come a long way since its inception.  What begun as a device with its origins in allowing creditors freedom to take what is theirs at any cost, including that of a life, has transformed into an instrument that allows people unshackle themselves from their debts.
     Debtors were viewed as quasi-criminals by the earliest bankruptcy laws.  In 1542 King Henry VIII passed the first bankruptcy law in England.  What this law did, once the details were filled in by the reign of Queen Elizabeth I, was create a legal device by which debtors who did not pay, could have their assets taken away from them.  One could even lose an ear or a life for being in debt.  Others were thrown into debtors prison for becoming bankrupt.  This kind of thought weaved its way though the 17th century when the British parliament would often act to increase the penalties against noncompliant debtors.
    The US constitution, the basis for the entire US legal system, was drafted in 1787.  Once the US was established as a country, provisions for bankruptcy were more or less left up to the states.  States acted freely in bankruptcy matters for all but 16 of the first 109 years after the Constitution was ratified.  These laws often left things to be desired.
   Progressively, the laws changed.  People began to be allowed to renegotiate their debts. The Bankruptcy Act of 1867 allowed corporations to take advantage of bankruptcy proceedings.  The railroads when down and out were brought back to life through being able to file for bankruptcy.  Perhaps most significantly, during the New Deal, the Supreme Court affirmed that bankruptcy "gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt."  The United States was able to transform bankruptcy, which at its outset was an oppressive institution, into a helpful tool.
   If you would like more information on bankruptcy or have questions for Gerald Moton please contact our office or call 210-841-5728.

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