As we celebrate Presidents Day, it is a good time to recognize how our bankruptcy laws have grown under different presidents. Our bankruptcy system is formed from federal laws passed by Congress and signed by presidents – all based on the belief that individuals and businesses should be able to eliminate debts that they are unable to repay. Before the existence of bankruptcy laws, debtors were powerless to stop creditors from seizing their properties or having them imprisoned for not paying their debts. Getting out of debt was often impossible unless you had wealthy or influential friends. A timeline of U.S. bankruptcy law shows that the principles of bankruptcy are older than the country itself.
- U.S. Constitution, 1787: The framers of the U.S. Constitution wrote a section that authorized the U.S. Congress to create federal bankruptcy laws. In the absence of federal laws, each state had its own laws on how bankruptcy should be administered.
- Bankruptcy Act of 1800: The first attempt at a federal bankruptcy law came during the administration of President John Adams. The act was very different from the bankruptcy we know today. Only creditors could initiate bankruptcy, the system was exclusively for merchant debtors, and two-thirds of the creditors had to approve of discharge. The act was repealed in 1803, due to complaints of corruption associated with the law.
- Bankruptcy Act of 1841: The next attempt at a federal bankruptcy law came during the early days of President John Tyler. The act greatly expanded bankruptcy protection so that it was available to all individuals and could be entered voluntarily. Federal courts, and not the creditors, would decide whether to discharge debts. However, the act was repealed in 1843, due to pressure from creditors.
- Bankruptcy Act of 1867: The U.S. Congress passed a third bankruptcy act during the presidency of Andrew Johnson. This act introduced the idea of a restructured repayment plan that was a precursor to Chapter 13 bankruptcy. Bankruptcy filers were also allowed to choose between federal and state bankruptcy exemptions. The act was repealed in 1878, due to complaints that the law was being abused.
- Bankruptcy Act of 1898: This act, passed during President William McKinley's administration, was the basis for modern U.S. bankruptcy law. Among other new provisions, the act made it easier for debtors to obtain discharge at the end of their bankruptcies. The act has never been repealed, though significant portions have been revised and replaced.
- Bankruptcy Reform Act of 1978: Major changes came to U.S. bankruptcy law during the presidency of Jimmy Carter. The reform act established the modern bankruptcy code, including the various chapters of bankruptcy. There have been various amendments to the bankruptcy act since then.
- Bankruptcy Abuse Prevention and Consumer Protection Act of 2005: President George W. Bush signed this law in April of 2005 and it became effective in October of 2005, making it much harder for individuals to discharge debts in Chapter 7 and to establish repayment guidelines for Chapter 13.
Contact a Frisco, Texas, Bankruptcy Attorney
Bankruptcy has come a long way since the founding of the U.S., and many of its changes have given more power to individuals who owe debts. A Denton County bankruptcy lawyer at The Page Law Firm can utilize the numerous bankruptcy tools that the U.S. offers to help with your case. To schedule a free consultation, call 214-618-2101.