Anyone who is in the unfortunate position of going bankrupt and thinks it is the end of the world, should be thankful for 21st century legislation. In moderm times, the consequences of personal bankruptcy are nowhere near as harsh as they once were.
Origin of the Term Bankruptcy
The word bankruptcy is formed from the ancient Latin bancus (a bench or table), and ruptus (broken). A “bank” originally referred to a bench, which merchants used when trading their goods. When a trader failed, he broke his bank (or bench), to advertise to the public that he could no longer afford to trade.
Bankruptcy did not exist in ancient Greece. If a man could not pay what he owed, he and his wife, children or servants were forced into “debt slavery” until the creditor was repaid by their physical labour. Debt slavery was limited to five years in many cities and debt slaves had protection of life and limb, which regular slaves did not. However the creditor could retain the slaves for longer or even force them to serve for a lifetime, usually under much harsher conditions
In Biblical Times
In the Old Testament, every seventh year is decreed by Mosaic Law as a Sabbatical year. The release of all debts that are owed by members of the community is mandated, but not of “foreigners”, in other words non- Jews. The seventh Sabbatical year, or forty-ninth year, is then followed by another Sabbatical year known as the Year of Jubilee wherein the release of all debts is mandated, for fellow community members and foreigners alike, and the release of all debt-slaves is also mandated.
Three strikes and you’re out
East Asia has also documented bankruptcy. According to al-Maqrizi, the Yassa of Genghis Khan contained a provision that anyone who was bankrupt three times or more was given the death penalty.
Spain has been worse of than the are currently
The first sovereign nation to declare bankruptcy was Spain, which was actually bankrupt four times by Philip II in 1557, 1560, 1575, and 1596.
History of English Bankruptcy
The first recognised piece of legislation in England was the Bankruptcy Act 1542. The aim of the act was to try and stop debtors to the state escaping the realm.
From 1604 a debtor could be placed in the pillory (device similar to the stocks) for non-disclosure of his assets to the Commissioners in Bankruptcy. He could then have his ear nailed to the pillory and cut-off if compliance was not forthcoming.
They was a time when you could find yourself in the clink for none payment of debts. Some debtors’ prisons permitted a basic kind of freedom but this wasn’t guaranteed. The debtor could pay for a limited amount of freedom such as being allowed to conduct business and to receive visitors. Prisons such as the Fleet and King’s Bench Prison allowed a practice known as ‘Liberty’, this meant the prisoner could live a short distance outside the prison. The Fleet also allowed clandestine ‘Fleet Marriages’. Samuel Byrom, son of the writer and poet John Byrom, was imprisoned for debt in the Fleet in 1725.
However, the prisoners were forced to pay for their keep and life inside was, to say the least, far from pleasant. For those unlucky enough, they were sent to prisons along with petty or even vicious criminals or even worse confined to a single cell
The father of the Charles Dickens was sent to one of these prisons (the Marshalsea), this was often described in Dickens’s novels.
The Debtors’ Act of 1869 abolished imprisonment for debt, although debtors who had the means to pay their debt, but did not do so, could still be incarcerated for up to six weeks.
Throughout history many famous names have been bankrupt:
- Handel (1737)
- Abraham Lincoln (1833)
- Mark Twain (1894)
- Walt Disney (1923)
- Buster Keaton (1934)
- Mike Tyson (2003)
Bankruptcy, however, is and should be considered to be a last resort as:
- The official receiver can seize your assets, including your home.
- Future earnings can be affected.
- You many struggle to get credit.
But, it could’ve been much worse.
Is Bankrupty Right For Me?
For some bankruptcy is the right way to get all their debts cleared and make a fresh financial start. However it is important get advice first from a trustworthy source. The Harrington Brooks Insolvency Department has a team of specialist bankruptcy advisors who can assess your situation and offer advice as to whether bankruptcy is right for you. This advice is free and you can simply call us for an informal and confidential chat.