What is Bankruptcy Anyway?
Origin of bankruptcy
The root of the term “bankruptcy” comes from the Latin words “bancus” and “ruptus” (which mean “bench” and “broken,” respectively). Ancient Italian bankers would conduct their business in the marketplace on trademark benches. When a banker went broke, he would break is bench as a symbol of his being out of business.
Different cultures have had different bankruptcy practices. Genghis Kahn mandated the death of anyone who claimed bankruptcy three times. Ancient Israel, on the other hand, had a system whereby all debts would be discharged every 49th year, called the year of Jubilee. Luckily for us, you don’t have to karate chop a wooden bench or get your head chopped off to file bankruptcy.
Modern American Bankruptcy
Modern American bankruptcy laws provide a balanced approach to discharging debt. Bankruptcy benefits both the individual who is filing and society at large. After all, a person bogged down in debt can’t financially contribute to the economy to the same extent as someone who is debt-free.
Most people who file bankruptcy file either a Chapter 7 or a Chapter 13. Broadly speaking, Chapter 7’s completely wipe out most debt at the time of filing, whereas a Chapter 13’s usually consists of a 5-year payment plan that pays off some of the unsecured debt. There are lots of nuances to Chapter 7’s and Chapter 13’s, and this blog post is meant to just provide some historical context and look at the tip of the iceberg. Our next post will explore Chapter 7 and Chapter 13 bankruptcy in more detail.
For more information about bankruptcy or your debt relief options, contact our Fairfield bankruptcy office to speak to one of our experienced team members.