Origin and Purpose
Abuse Prevention Act of 2005
The origin of the word bankruptcy can
be traced back to Italy during the Medieval Period. In those days,
businessman was unable to pay his debts, the practice at that time
was to destroy his trading bench. From the term "broken
bench" or "banca rotta" comes the word
Back then, tradesmen unable to repay their debts were
dealt with harshly. The primary focus in that period was on recovering the
interests of the
creditors, not the welfare of the debtor. In Old England, for example, penalties
could be draconian and range
from imprisonment (debtors prison) to the death penalty.
In the US, early bankruptcy laws were temporary measures
passed in response to harsh economic conditions. In general, when economic
conditions improved, bankruptcy laws were repealed. In modern days, bankruptcy
laws became permanent and have been periodically amended or revised to meet current
economic and political conditions.
The Bankruptcy Act of 1898 was the first piece of modern
day legislation to extend protection to corporations from creditors and is the
foundation of today's bankruptcy laws. Since 1898 there have been many acts and
revisions: Bankruptcy Act of 1933 and 1934 during the Great Depression; Chandler
Act of 1938; 1978, the first major overhaul since the Chandler Act; 1980
Bankruptcy Tax Act; 1984 amendments to the 1978 Act; the 1994 overhaul of the
From there the laws have evolved until recently, as of
2001, new legislation is pending in congress to make it more difficult
for consumers to file a chapter 7 bankruptcy (complete dismissal) and force them
into chapter 13 (reorganization) repayment plan.
Bankruptcy today seeks the
dual purpose of benefiting the debtor
as well as the creditor by finding a happy medium where the debtor
can comfortably meet their monthly obligation and the creditors
recoup their investment.
The main emphasis is on rehabilitating the
debtor (reorganization) who is in distress. The laws in place today protect two
different segments of our society, the business sector, both profit and
non-profit, and the consumer.
The following links will cover
more details about each chapter (7,11,13) and help you decide if
filing is right for you.
In general, you don't need
bankruptcy if there are no assets a creditor with a judgment can attach, or
your assets are exempt.