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Home >> Bankruptcy Information Explained
Bankruptcy Information Explained
By: Cole Collins
Technically, the term bankruptcy comes from the old Italian banco rotta or busted bench - most likely a metaphor for flat broke though, for merchants unable to pay their debts in olden days, more than a few benches (or countertops) were destroyed alongside. The overall notion's rather older and refers to the official distinction of debts that a court agrees could not reasonably expect to be repaid. As a matter of fact, the earliest legal definition of bankruptcy protection appeared in Roman statutes during Caesar's reign. At the time, debtors could be legally tortured or even killed at the whim of creditors should funds continue to be owed. The Cessio Bonarum allowed debtors to trade the entirety of their possessions in exchange for their lives. Not quite today's Chapter 7 program, but not all the far away either.
It wasn't until the start of the eighteenth century that governments introduced the idea that debtors were not necessarily criminals. In 1705, under the reign of Queen Anne, the concept of discharged debts and honest merchants unable to meet their obligations for reasons beyond their control was first considered, and, though the laws have been greatly expanded in subsequent years (and ever so slightly rescinded the past two decades), that was when the bankruptcy most Americans only ever hope to know through game shows and board games was invented.
Of course, these days, bankruptcy - at least, the specific level of bankruptcy - is no longer left up to the individual debtor or creditor. Trustees assigned by the court take care of that part, deciding whether or not individuals could ever repay their borrowers, and fulfilling the definition of the ever shifting bankruptcy code. According to the statutes attached to the United States constitution, bankruptcy specifically denotes an inability to repay lenders as agreed by governmental institutions. In almost every situation, the debtor files the bankruptcy declaration, though there are cases of lenders forcing the issue for tax reasons.
There are currently several forms of bankruptcy protection available in America - from corporate (or even municipal) re-organization to the programs offered family fishermen - and, in reality, there's no such thing as a traditional bankruptcy anymore. Chapter 7 remains the most common form of personal bankruptcy, though, and it's still intended to allow borrowers who've suffered financial mishaps beyond their control to keep safe their assets and prevent their wages from being garnished. Chapter 13, though it does not liquidate debts, does still vouchsafe the borrowers' possessions and forestall repossessions and foreclosures.
More and more American consumers are investigating the possibility of bankruptcy now that the economy has taken a turn for the worse. It's understandable - this was the reason the government originally created bankruptcy protection - but any consumer thinking about taking advantage of the supposed benefits of the program should be aware of the recent changes in legislation. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has greatly complicated both filing for bankruptcy and the extent to which debtors suffer through the process.
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