The Right of Unconditional Bankruptcy Discharge: It's Now Yours Skip to main content

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The Right of Unconditional Bankruptcy Discharge: It's Now Yours


People have been struggling with debt problems since ancient times, and for the same reasons that many of us continue to experience them today: loss of income, disability, or some other unforeseen event that prevents us from being able to pay our debts. But it's only been in recent times that the laws have provided real protection for people caught up in such circumstances. In Ancient Greece, if you couldn't pay your debts, you were imprisoned, forced to work as a slave for your creditors, or, worse yet, maimed or even murdered. And, these practices continued for centuries.

Finally, in 1570, England passed the first law establishing the bankruptcy process -“ largely because the debtors' prisons were getting overcrowded. But the purpose of the law was to provide relief for creditors, not debtors. Only creditors could commence a bankruptcy, and only against merchant debtors. If you were an ordinary citizen, you were out of luck. What's more, the forced sale of your property was not enough. You were still on the hook for any unpaid debts remaining after your property was liquidated. And, if you failed to make due, you were hauled off to prison, your ear was cut off, or you were nailed to a public pillory -- by your ear.

The year of 1705 saw a glimmer of hope: England passed a new law, which created the right to discharge debts in bankruptcy. But to actually have your debt discharged, you had to "cooperate- with the liquidation process to the satisfaction of your creditors, and failure to do so could result in death. The next version of the law in 1732 was a bit more enlightened. It cut out the possible death sanction. But you could still only get a discharge if you "cooperated- and only if two-thirds of your creditors agreed to it.

During colonization, most of the American states followed the English laws in dealing with bankruptcy. Our Constitution specifically included a provision allowing Congress to pass uniform bankruptcy laws. But the first American bankruptcy law, which was passed in 1800, largely paralleled the 1732 English law. And, it was repealed just three years later because it was considered unjust to creditors. In fact, it wasn't until 1833 that the federal government finally abolished debtors' prisons. 1841 saw an improvement in the law: for the first time, debtors could file a bankruptcy case. But this law was repealed just a few years later -“ again because of a perceived injustice to creditors. The same thing happened a couple of decades later: in 1867, a new law was passed expanding the rights of debtors, but it was repealed in 1878 because people thought it went too far.

Finally, the Bankruptcy Act of 1898 was passed. This law recognized the right of "unconditional discharge- -- the right to financial relief without creditor consent or court permission. And this also meant a discharge was really a discharge -“ your debts were wiped out, once and for all. For the first time, the law recognized that bankruptcy is not just about helping creditors clear their balance sheets; it's really about helping everyday people, like you and me, deal with unmanageable debts -“ because allowing them to reestablish themselves as financially stable is the best thing for them and society.

While the bankruptcy laws have changed over the last century, these basic principles have stayed the same. It took awhile, but the law finally caught up with reality, and it is here to help you make a fresh start. So, if you're struggling with debt, call a Raleigh bankruptcy attorney today and see what the law can do for you. With offices in Raleigh, Durham, Wilson and Fayetteville, the Law Offices of John T. Orcutt can help you get rid of debt. Call today to set up your free initial consultation: +1-919-646-2654.

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