The Evolution Of the US Bankruptcy Law

As deputized by the US Constitution, the US Congress enacted the first bankruptcy law in 1800, which was repealed in 1803. Since then, Congress continued to pass, repeal, amend the law to versions that were deemed applicable to the different situations at that time, until the 1898 revision which lasted for decades. One of the changes was doing away with the debtor’s imprisonment as the usual or normal punishment except in grievous cases or fraud.

The Bankruptcy Act of 1898 lasted for 80 years. While the law still focused on the liquidation of the debtor’s assets to pay the financial obligations, it also introduced the rehabilitation of the debtor’s financial status. From the second world war to the 1970s, only a few cases of bankruptcy were recorded.

In 1978, an act known as the Bankruptcy Reform Act was passed. The new law, which took effect ,October 1, 1979 completely reformed the prevailing practices on bankruptcy and put emphasis to the rehabilitation of the failed businesses to its operating or working condition, after bankruptcy. This was stated in Chapter 11.

The 1980s and the early 1990s was the period for the highest number of declared bankruptcies, which were of varied types. Since 1884, there were several amendments to the bankruptcy law that ranged from taxes to the rules for the protection of the debtor from losing all assets as a consequence of declaring bankruptcy.

The law was again amended in 1986 to nationalize the Office of the United Trustee. This office, which is under the Department of Justice, was the enforcer and overseer of the law, especially the administration of the bankruptcies. It also appointed Chapter 7 trustees. In 1994, the act was again amended to cover necessary changes related to the consumer and corporate provisions of the law.

The latest law is the ‘New Bankruptcy Law”, formally known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, signed into law on April 20, 2005. The law is supposed to make it "more difficult for people to file for bankruptcy" under Chapter 7. Under Chapter 7, “most debts are forgiven or discharged.”

Bankruptcies, whether individual or corporate, seem to be “easier” to file if assisted by companies that have been put up to provide the necessary services to those who are unfortunate to find themselves in the verge of declaring bankruptcy.

The debtor should always thoroughly study the law and weigh the pros and cons of declaring bankruptcy. Study the law before signing anything. Choose only for bankruptcy if you strongly believe that it is the only chance to recover from your financial woes. Otherwise you’ll find yourself in a much worse financial situation without any visible hope of recovery.

To Contact a Bankruptcy Mailing List with a direct mailer, dialer, or to use as telemarketing leads, Look up Response Makers, LLC.