Bankruptcy is NOT a Bad Word

Bankruptcy is not a bad word. The word bankruptcy is formed from the ancient Latin bancus (a bench or table) and ruptus (broken). In ancient Greece, the notion of debt forgiveness was unknown. If a man owed a debt that he was unable to pay, his entire family, including any servants he may have owned, became debt slaves. In England, the first official laws concerning bankruptcy were passed in 1542 under Henry VIII. At that time, a bankrupt individual was considered a criminal and, as such, subject to criminal punishment ranging from incarceration in debtors' prison all the way to the extreme sentence of death. 

Modern bankruptcy laws and practices in the United States emphasize rehabilitating (reorganizing) debtors in distress, with a limited emphasis on punishing the debtor. In a 1934 U.S. Supreme Court decision, the Court revealed that the primary goal of bankruptcy laws was to offer debtors a "fresh start" from financial burdens. In Local Loan v. Hunt, the Supreme Court asserts, "[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." 

On April 19, 2005, President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCA) of 2005 into law. The U.S. Department of Justice asserts that the BAPCA "opens a new era in the history of bankruptcy law and practice. On October 17, 2005, the BAPCA became effective. As he signed the bill, President Bush declared, "Under the new law, Americans who have the ability to pay will be required to pay back at least a portion of their debts. Those who fall behind their state's median income will not be required to pay back their debts. The new law will also make it more difficult for serial filers to abuse the most generous bankruptcy protections. Debtors seeking to erase all debts will now have to wait eight years from their last bankruptcy before they can file again. The law will also allow us to clamp down on bankruptcy mills that make their money by advising abusers on how to game the system. Do not feel alone! Bankruptcy filings are increasing every year.