Bankruptcy has long been a way for individuals and businesses to attempt to settle with creditors when their debts become unbearable. However, across the history of bankruptcy law, the treatment of creditors and debtors has not always been equal. In order to see how the system has evolved over time, this short summary has been put together.
Early bankruptcy law
Since 1800, the United States has passed laws intended to allow for creditors to recover their lost investment. These early attempts at a bankruptcy law were usually undone within a few years of their passage, and they almost all arose from times of hardship. During this period, almost all bankruptcies were actually involuntary and served solely as a way for the creditor to take back their investment from the debtor.
The Bankruptcy Act of 1898
In 1898, however, this attitude began to soften. The Bankruptcy Act of 1898 at the turn of the 20th century gave companies filing for bankruptcy the option to be shielded from creditors and instead focused more intently on rehabilitating the debtor’s ability to pay by reorganizing the debt.
As the 20th century progressed, the attitude that bankruptcy was a way for debtors to find relief persisted. Spurred on by the great depression, the Bankruptcy Acts of 1933 and 1934 and the 1934 Supreme Court case Local Loan v Hunt officially stated that the purpose of bankruptcy law was to give the debtor a fresh start free from their oppressive financial burdens.
The Bankruptcy Reform Act of 1978
In 1978, the basis of modern bankruptcy law was established with the Bankruptcy Reform Act of 1978. This law created Chapter 11 and 13 bankruptcy to replace the older forms of bankruptcy and made it easier for businesses and individuals to reorganize their debts. From 1978 to the turn of the 21st century, a number of fine-tunings were made to ensure that the scope and reach of bankruptcy were appropriate and that individuals and companies were being awarded a fair chance to start again.
This historic work has come together to form the modern bankruptcy process, a more debtor-friendly system than ever before. As the laws continue to shape bankruptcy policy, it continues to be guided by the principle that bankruptcy exists to serve the debtor, not the creditor. However, this does not mean that there are not some laws in some states that can serve as traps for the unwary or confusing regulations designed to stamp out potential fraud.
Filing for bankruptcy
If you are considering filing for bankruptcy for yourself or your business, you will need an experienced bankruptcy attorney to help you navigate the complexities of the process and attend to the fine details that could result in your case being dismissed. An experienced bankruptcy attorney can also find shelters and loopholes in bankruptcy law that can help to protect your assets that might otherwise be taken for liquidation.
With the right bankruptcy attorney, the process can be straightforward, simple, and low-stress. The best way to find the right bankruptcy attorney is with Attorney at Law.
At AAL, our nationwide network of attorneys and law firms helps us match you with an experienced bankruptcy attorney in your area. Our partners are experienced and empathetic. In addition to putting you at ease with their extensive knowledge, our partners also take care to ensure that you understand every part of the process and help you have the best possible experience during this stressful and difficult time.
Don’t wait. Contact AAL today for a free, no obligation consultation and begin your journey to financial independence.