Bankruptcy has been around for over four hundred years. However, what we assume to be bankruptcy, the elimination of debts, is not what bankruptcy started out as or was intended to become.
The word bankruptcy comes from bancus, the tradesman's counter, and ruptus, broken, denoting one whose place of business was broken or gone. Under pre-English bankruptcy laws, Rome, under the Casears had debt collection laws, a practice of appointing trustees after the market-place bench was either broken or removed as a declaration of a merchant's bankruptcy. The trustee auctioned off the property of the bankrupt to the bidder who would pay the most to creditors. The trustee was appointed by the creditors or by a magistrate if creditors could not agree. The trustee was called the "curator bonorum" meaning "protector" or"caretaker" of the property which he held for the benefit of the creditors.
The first English bankruptcy law was passed in England in 1570 during the rein of Henry VIII. It is the foundation of the American bankruptcy laws. While some historians claim a statute passed in 1542 was the first bankruptcy law, it was not. The 1542 statute was designed to prevent frauds on creditors. Under that statute the debtor was summoned to appear before a Chancellor and on the demand of the creditor, to be examined under oath, and if the debtor failed to surrender his possessions to pay his debt, off to debtors' prison he went.
In 1570 the first real bankruptcy statute was approved. It was necessary since the debtors' prisons were at capacity and this incarceration was creating a national problem in England. Under the English 1705 Statute of Anne bankruptcy act, uncooperative debtors could be executed. It is estimated that five were executed under this law.
Early bankruptcy certainly had some provisions that would be considered unusual under today's bankruptcy law. For example:
- Only a creditor could commence a bankruptcy case against the debtor.
- Citizens were imprisoned for debts and individuals could not file for bankruptcy.
- Only a merchant could be a debtor.
- Bankruptcy was not for individual debtors but as relief for creditors from the debtors.
- During bankruptcy, assets were seized, sold and distributed to creditors but that did not stop the collection of remaining monies owed. There was no discharge of obligation for the remaining debts. Collection efforts continued after the sale of all of the debtor's property.
- Bankruptcy was not something that you did but rather something that you were. An act of bankruptcy was a form of conduct that occurred when a debtor was avoiding repaying debts owed.
- Bankruptcy commissioners (trustees) could break into your home and seize assets which could be sold to satisfy the debt.
- Debtors could have an ear cut off or have an ear nailed, while still attached, to a pillory in a public place.
Bankruptcy - One of the most misspelled words in history.
Over the years the word bankruptcy has been one of the most misspelled words. Here are some of the most common misspellings that we've seen:
Bancrupcy, bancrupt, bancruptcy, bancruptsy, bankcript, bankcrupcy, bankrruptcy, bankrumptcy, bankrup, bankrupc, bankrupcy, bankrupse, bankrupsee, bancrupsy, bancrupty, bank rupucy, bankcrupsy, bankructy, bankrupce, bankrupcty, bankrupcy, bankruptancy, bankruptcey, and bankcrrupt.
Bankruptcy Slang
Many expressions have been used to describe people and bankruptcy over the years. Here are a few of our favourites:
- Take a Bath
- On Carey Street - After the name of the London street where the bankruptcy court used to be located
- Turned up on his face
