Bankruptcy in the United States has a long history, dating back to the era of the founding fathers. While early legislation was originally modeled on English law, modern bankruptcy legislation differs greatly from its predecessors. In the following entry, the Knochel Law Offices, P.C. in Bullhead City, AZ, offers a brief history of bankruptcy law in the U.S.

Early U.S. Bankruptcy Laws

The earliest U.S. bankruptcy law was the Bankruptcy Act of 1800, which was limited to traders and affected only involuntary cases. The law was repealed in 1803 after creditors were found to have repeatedly forced debtors into bankruptcy. Other legislation was passed during the 1800’s, with the vast majority failing due to being either too harsh or too lenient on debtors.

Later, The Bankruptcy Act of 1898 afforded companies the option of creditor protection; introducing the concept of creditor-debtor relations as they are known today. After that, The Bankruptcy Act of 1938, provided a voluntary choice. This afforded businesses the ability to declare themselves bankrupt and restructure their leadership to maximize profits. This also paved the way for the Securities and Exchange Commission, an organization tasked with regulating the stock market and protecting investors if a company committed fraud or declared themselves bankrupt.

Bankruptcy Reform Act of 1979

Replacing the act of 1898, the reform in 1979 was one of the most notable actions in shaping the modern bankruptcy climate. It was a major overhaul of the system, effectively reducing the powers and size of the court and introducing Chapter 7, 11, and 13 bankruptcies.

The need for bankruptcy laws to protect creditors and debtors has been clear and present since the beginning of American history. Following this 1979 reform, other legislation sought to eliminate debts and allow American consumers the ability to rebuild their financial lives. However, as it stands, we can all thank the 1979 reform for setting the modern standard.

If you face bankruptcy and need an attorney, the professionals at Knochel Law Offices, P.C. will help you through this difficult time. Serving Bullhead City, as well as the Tri-State area of Arizona, California, and Nevada, they provide professional legal counsel across a variety of case areas, including divorce, criminal law, and personal injury matters. Stop by the website or call (928) 444-1000 to speak with a representative today.