A Brief History of Bankruptcy
The first bankruptcy law was enacted by Julius Caesar prior to the birth of Christ. Debtors were allowed to file bankruptcy every seven (7) years. It was patterned after Judaic Law (Deuteronomy 15:1) wherein the Jews forgave all their indebtedness every seven years (The Year of Jubilee) .
The law passed from the Romans through English law, and finally our Founding Fathers authorized expressly the right of Congress to enact laws regarding bankruptcy (Article 1 of the Constitution). Congress did so, and it remained a right every seven years (7) until BAPCPA (2005).
A three-year Bankruptcy Review Commission, working with all elements of the creditor and debtor communities, had prepared an amendment to the Bankruptcy Code, but the banks having purchased undue influence over the Congress through lobbying and political contributions utilized that power to put in and pass their own modification bill.
That draconian bill changed the period to every nine years (9) for a new bankruptcy and provided that people over the Median Income must complete a “Means Test”, utilizing the I.R.S. standards to determine whether or not funds could be available to pay unsecured debts. Debtors who fail the “Means Test” are presumed to be in bad faith with a Chapter 7 filing, and therefore must resort to a Chapter 13 to pay some or all of their creditors.
Other pro-bank / anti-debtor provisions were enacted as well. Bankruptcy today is a complex and somewhat difficult process. Only learned and experienced professionals can safely navigate the confusing waters of a law that is unclear, incomplete, and at times contradictory.