You might be ready to file your paperwork, or you could just be curious about the details. This review of the history of bankruptcy in the United States can give you a better understanding of the practice and what it could mean for your financial health. Then, you’ll be better equipped to decide if you need to speak with a lawyer about filing for bankruptcy in Arkansas.
Before the United States
Bankruptcy has its beginnings long before America became a country, all the way back to 1542 in England. The first laws labeled the bankrupt person a criminal—but then, Spain’s own Philip II declared four of his country’s own states bankrupt before the end of the 16th century.
By the 18th century, bankruptcy petitioners were allowed to discharge some debts as long as they made a good faith effort to pay what they could. Early American settlers followed suit.
Early on in America’s history, bankruptcy laws were put in place as a response to an economic issue, but they were promptly repealed a few years later.
A land speculation bust in 1800 caused the first bankruptcy laws in the United States to be put on the books; these were repealed in 1803. There was another panic in 1837, laws were passed in 1841, but they were struck down in 1843.
Then there was the Civil War, and the government put through another round of bankruptcy protection, which went into effect in 1867 and were yet again repealed in 1878. However, this round of bankruptcy laws had something different: it included corporations.
The 20th Century and Beyond
The 20th century in the United States saw the government put a permanent bankruptcy in place. In 1934, the Supreme Court called bankruptcy a “fresh start” and asserted, “[I]t 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”—and that was just the beginning.
By 1978, Congress started to make big changes to American bankruptcy laws. This so-called “Bankruptcy Code” streamlined the process, but bankruptcy in the United States was set to go through additional changes. New bankruptcy rules specific to farmers were added in 1986 while a reform in 1994 expanded the ability for bankruptcy courts to hold jury trials.
In 2005, Congress introduced a means test and made credit counseling a condition for relief. Over the past several years, bankruptcy laws have been amended to include student loans and distressed banks. This change signifies the need for the government to offer a fresh start to people in different conditions.
If you are facing bankruptcy, speak with an attorney who can give you a run-down of your options. If you want to learn more about how Nolan Caddell Reynolds can help, contact one of our bankruptcy lawyers at our office at 866-242-0452. Our lawyers are ready to work for you.