Bankruptcy is a process provided by Federal law that allows financially distressed individuals or businesses to have some or all of their debts eliminated. The Federal Code Law provides for the development of a plan that allows a debtor, who is unable to pay his creditors, to resolve his debts through the division of assets among his creditors. The supervised decision in this case allows the interests of all creditors to be treated as equally as possible. Throughout history there have been changes to the laws, codes, and forms, which has had different impacts on many individuals and businesses.
In medieval Italy, when a businessman did not pay his debts, it was the practice to destroy his trading bench. From the Italian language for broken bench, "banca rotta," comes the term bankruptcy. The first known bankruptcy law was passed in England in 1542 to give creditors remedies (besides imprisonment) against debtors who did not pay their bills.
Under this law, debtors were considered quasi-criminals.
Modern American bankruptcy had its permanent beginning with the Bankruptcy Act of 1898. This law allowed both voluntary and involuntary cases. It permitted debtors to claim exemptions and removed most barriers for discharging virtually all debts.
During the 1920s, the act was amended to add grounds for denial of discharge and debts excepted from the discharge. In 1938, Congress overhauled American bankruptcy law. Although most changes affected business bankruptcies, this law also created Chapter 13, the wage earners' repayment plan. The next major change came with the enactment of the Bankruptcy Reform Act of 1978, and has been amended to add several new categories.
Every bankruptcy proceeding requires the debtor to file with the court a list of all outstanding debts as well as a complete list of their assets. The court will then appoint a...