Bankruptcy

Bankruptcy

In the United States, early federal bankruptcy laws were temporary responses to bad economic conditions. The first original bankruptcy law was enacted in 1800. Similarly, in 1841, in response to the panic of 1837 in which the real estate market collapsed and many banks across the country began to fail, the second bankruptcy law was passed. The effects that the Civil War had on the economy caused Congress to pass another bankruptcy law in 1867. All of these laws contained some allowance for discharge of unpaid debts. The first two laws, those of 1800 and 1841, allowed only minimal discharge of debt. The 1867 law was the first to include protection from corporations.

Modern bankruptcy laws and practices in the United States emphasize rehabilitating debtors in distress. The Bankruptcy Act of 1898 was the first to give companies in distress an option of being protected from creditors. This reorganization provision was made much more formal and extensive in the United States during the 1930s. The Great Depression yielded much bankruptcy legislation; in particular, the Bankruptcy Act of 1933 and the Bankruptcy act of 1934. The legislation culminated with the Chandler Act of 1938, which included substantial provisions for the reorganization of businesses.

During the period from World War ll through the 1970s, bankruptcy was not a major topic in the news. With the exception of railroads, there were not many notable business failures in the United States.

The Bankruptcy Reform Act of 1978 went into effect on October 1,1979. A strong business reorganization Chapter was created, known as Chapter 11. This replaced the old Chapters X, Xl, and Xll that had been created by the 1898 act and amended by the Chandler Act. Similarly, a more powerful personal bankruptcy, Chapter 13, replaced, Chapter 13 replaced the old Chapter Xlll. In general, the Reform Act of 1978 made it easier for both businesses and individuals to file for bankruptcy.

One pivotal event was a 1982 Supreme Court ruling that bankruptcy court's enlarged jurisdiction, which was established by the 1978 act, was unconstitutional. In other words, the Supreme Court ruling stated that bankruptcy judges had been given too much power by Congress and their duties overlapped with those of other branches of the government. The 1982 ruling led to the Bankruptcy Amendment Act of 1984.

On October 22,1994, the Bankruptcy Reform Act of 1994 (Public Law 103-394, October 22,1994), the most comprehensive piece of bankruptcy legislation since the 1978 act, was signed into law by President Clinton. The 1994 act contained provisions for both business and consumer bankruptcy, including provisions to expedite bank bankruptcy proceedings, provisions to encourage individuals debtors to use Chapter 13 to reschedule their debts rather than use Chapter 7 to liquidate, provisions to aid creditors in recovering claims against bankrupt estates, and the creation of a National Bankruptcy Commission to investigate further changes in bankruptcy law.

For more information regarding your bankruptcy rights and alternative options call: 1-877-61-Hanna (1-877-614-2662).