Bankruptcy laws originated in England. Bankruptcy is a method of satisfying creditors by distributing a debtor’s assets among them as payment for the debtor’s debts. While the law was originally intended to satisfy creditors, it has evolved into a method of equitable treatment for both debtor and creditor. One of the primary purposes of bankruptcy is to give a debtor (you) a new beginning in life by clearing debts so the debtor can pursue future opportunities without the pressure of debt. In the 1970s, the main reason for bankruptcy was high medical bills. Today, it is high credit card balances. Bankruptcy laws were established in this country by Article I, Section 8, Clause 45 of the United States Constitution, and date back to 1800. Bankruptcy acts were passed in 1800, 1841 and 1898. The 1898 bankruptcy laws were completely revised in 1938. The 1938 revision took place before a significant amount of consumer credit was extended, so the Act was again revised by the Bankruptcy Reform Act of 1978, which became effective on October 1, 1979, and was amended in 1984. The Bankruptcy Reform Act of 1994 made additional changes and became effective on October 22, 1994. The Bankruptcy Reform Act of 1994 adjusted filing and exemption limits and allowed for inflation adjustments every three years. In 1997, four acts were passed by Congress:

  1. The Private Trustee Reform Act.
  2. The Investment in Education Act.
  3. The Working Family Farmer Protection Act.
  4. The Bankruptcy Judgeship Act of 1997.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) was signed into law by President George W. Bush on April 20, 2005, and became effective on October 17, 2005. The Act represents one of the most comprehensive overhauls of the Bankruptcy Code in more than 25 years, particularly with respect to its consumer bankruptcy reforms. The intent of Congress was to improve bankruptcy and practice with a dominant theme of restoring personal responsibility and integrity to the bankruptcy system.