What Is Bankruptcy? Get Answers To A Fundamental Question
With bankruptcy often in the news — and often in conversations involving people burdened by unmanageable debt — it is surprising how many people misunderstand what it actually means. For an explanation of its actual meaning, we can look to history as well as to how the word bankruptcy came about.
The Word Bankruptcy
The etymology of the word itself shows it was formed from a combination of two Latin words bancus (bench or table) and ruptus (broken). The Italian version was banca rotta. It was a Medieval custom for a banker’s or moneychanger’s bench to be publicly broken to signify insolvency. Hence the literal translation of “broken bench” or “broken bank” to form our English vocabulary item bankruptcy.
History Of The Process Of Bankruptcy
Historically, a process similar to bankruptcy as we know it today — a systematic forgiving of all debts every seven or 13 or 50 years — is described in ancient Hebrew scriptures. More recently, the founders of American law incorporated provisions for bankruptcy into the U.S. Constitution, to prevent development of harsh punishments for insolvency such as debtors’ prisons once used in Europe. Bankruptcy reforms enacted in 2005 put in place the process of bankruptcy that most law firms and bankruptcy clients are familiar with today.
What Bankruptcy Is Not
Contrary to popular notions, bankruptcy does not necessarily equate to:
- Total, abject financial failure
- Jumping off a cliff
- The end of the road
- Credit ruined forever
- A financial dead-end with no way forward to solvency
- A public disgrace
In many cases, the very idea of bankruptcy is much more frightening to debtors than the reality of the steps involved. Inventorying assets and debts, preparing to file and waiting for a discharge are more businesslike and less disastrous than many people imagine before they actually go through the process. Friends, neighbors and coworkers are often unaware that a person has filed bankruptcy.
What Bankruptcy Actually Is
On the contrary, those who implement bankruptcy as a debt relief option come to realize what it really is:
- A legal, time-honored path to debt relief, provided for in the U.S. Constitution
- An alternative to debtors’ prisons common in past civilizations
- An orderly process, overseen by a bankruptcy court trustee, resulting in discharge of debts
- A route to a fresh start for overwhelmed debtors
A Chapter 7 bankruptcy typically wipes out most or all debts. Most clients of Lefkovitz & Lefkovitz are able to keep all their assets while achieving a fresh start.
Contact Our Nashville Bankruptcy Attorneys For More Information
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.