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Bankruptcy Lawyers

History

The concept of indebtedness is mentioned in the Bible and other religious texts, and bankruptcy laws were established as far back as the ancient Roman Empire.

Bankruptcy law in the United States is based on English bankruptcy law, which was first established in 1542. “Early American bankruptcy laws were only available to merchants and generally involved imprisonment until debts were paid or until property was liquidated or creditors agreed to the release of the debtor,” according to “History of Bankruptcy Law in the United States,” by J. Michael Deasy. Although the states granted Congress the power “to establish…uniform laws on the subject of bankruptcies throughout the United States” in the U.S. Constitution (as adopted in 1789), there was no uniformity in bankruptcy or debt enforcement law among the United States, and many state laws were inconsistent and discriminatory. They also negatively impacted commerce between the states.

It was not until 1898 that Congress passed a national bankruptcy law. (Emergency federal bankruptcy laws existed from 1800 to 1803, 1841 to 1843, and 1867 to 1878, but all were repealed.) This law, along with its amendments, was known as the Bankruptcy Act. It governed bankruptcy in the United States for 80 years.

In 1978 the Bankruptcy Reform Act was passed. The act, along with its amendments, became known as the Bankruptcy Code. The code created a single uniform procedure for business reorganizations, increased the availability of financial rehabilitation (rather than just the liquidation of the assets of individuals who declared bankruptcy), and established a separate system of bankruptcy courts and judges to hear bankruptcy cases. A major amendment to the code in 1994 established bankruptcy appellate panels, clarified the authority of bankruptcy judges to conduct jury trials, and mandated other revisions. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 also significantly amended both the consumer and corporate provisions of the code.

Lawyers have worked to assist individuals and organizations that were in financial distress ever since the first bankruptcy laws were passed, but this legal specialty did not begin to grow and become formalized until the Bankruptcy Act of 1898 was passed. This national bankruptcy law created consistency among the states and allowed more individuals and companies to file for bankruptcy. The field of bankruptcy law has grown steadily since 1978, when the Bankruptcy Reform Act was passed. From 1978 to 1980, the number of bankruptcy petitions that were filed in the U.S. nearly doubled (from 168,771 to 331,264), according to the American Bankruptcy Institute. Slightly more than one million individuals and businesses filed for bankruptcy protection in 2013. Bankruptcy lawyers remain in steady demand as a result of the economic recession (which was caused by the subprime mortgage crisis, financial malfeasance on Wall Street, and other factors).