Bankruptcy often provides debtors who have gotten in over their heads a financial fresh start, allowing them to have most if not all of their debts discharged and freeing them from the harassment of overzealous collection agencies.  Bankruptcy as a system started in Italy centuries ago, and was meant to favor creditors over consumers.  Back then, debtors were forced to sell their property to pay their creditors and, if the proceeds didn’t cover all they owed, they could even be thrown in prison if they couldn’t pay the remainder.

Luckily for us, modern-day bankruptcy in the U.S. is not based on the Italian system.  Bankruptcy laws started being passed during the 1800s, with each one coming and going after a few short years.  During this time, opposing groups battled not over implementing bankruptcy law, but over what kind to pass.  Pro-debtor groups wanted a purely voluntary law, while pro-creditor groups favored having both a voluntary and involuntary type of bankruptcy.  Finally, the Bankruptcy Act of 1898 was passed–the first U.S. bankruptcy law that was not repealed soon after.  This form of bankruptcy was also the first designed to favor debtors more than creditors.

The United States Constitution actually authorized Congress–in Article I, Section 8–to enact laws on the subject of bankruptcies.  In 1978, Congress passed the “Bankruptcy Code” under Title 11 of the U.S. Code.  The Bankruptcy Code has been amended several times since then, with the most significant taking place in 2005.  This “Bankruptcy Abuse Prevention and Consumer Protection Act” (BAPCPA) was heavily influenced by the credit card companies and banks who believed the previous versions were far too easy on debtors.  Under the BAPCPA, those filers who can truly afford to pay back some of their debts while still having enough to live on must file for Chapter 11 bankruptcy, while those who are truly in need may still get all eligible debt discharged under Chapter 7 bankruptcy.

Fortunately, for most practical purposes, the BAPCPA has not prevented most debtors who truly need to file for Chapter 7 protection from doing so.  If you’re considering filing for Chapter 7, you’ll need to attend a credit counseling session and meet certain requirements to qualify for this type of bankruptcy, but an experienced bankruptcy attorney will have no problems helping you figure out whether you qualify, and the best way to proceed with your case under modern bankruptcy law.  While bankruptcy laws in the United States have evolved over the decades, bankruptcy today can still help debtors like you get a well-deserved fresh start.