Early History of the Law of Bankrutpcy

Early History of the Law of Bankrutpcy "There have been laws governing the relationship between creditors and debtors for a number of years. There are numerous cultures throughout the world that provide for the possibility that a person will be unable to repay their debts for an extended period of time. In modern economies, the expansion of commerce has necessitated the development of a variety of methods for regulating the relationship between creditors and debtors. Insolvency affects the family members of the bankrupt individual, their employers and other employees in the insolvent business, social security agencies and other government departments as well as tax authorities, not to mention the bankrupt's creditors. The evolution of bankruptcy law can be viewed as a process of compromise between these competing societal interests, and the current structure of insolvency law reflects this competition.In the western English-speaking world, the law of bankruptcy can be traced back to the English common law of bankruptcy and statutes, which date back to 1542. These statutes provided a mechanism for the enforcement of commercial debts and established the 'keeping house' doctrine in relation to bankruptcy proceedings, whereby a person could avoid service of legal documents by refusing to answer the door at their residence. This doctrine has genuinely persisted in many modern bankruptcy statutes.The early English law also instituted the practice of punishing bankrupts as a future deterrent against such conduct. People were imprisoned until the late 1800s for failing to pay their debts. Indeed, some of the earliest judges went so far as to say that if a prisoner died of starvation, they merited it because of their financial mismanagement. In bankruptcy, the concept of debt discharge did not arise until the late 1700s. Since then, however, the rehabilitative aspect of bankruptcy law has become the dominant philosophy underlying the drafting of laws and the decisions of judges.Also in 1844, the legal concept of a corporation was created in England, and shortly thereafter, the insolvency of a corporation became an issue that required attention. Subsequently, the law of corporate insolvency evolved with the law of personal insolvency as its driving force. Even in contemporary law, the law of personal insolvency can be seen to have influenced the law of corporate insolvency. Additionally, the law governing corporate insolvency has had an impact on the personal element, as it was only after corporations were permitted to enter into payment plans with their creditors that a similar payment plan structure was established for individuals.
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