I teach bankruptcy law to future paralegals. My class begins with a short review of the history of bankruptcy law. I start with this lesson because I believe it is important to show how far bankruptcy laws have progressed and how the themes of the Bankruptcy Code developed. I also love history and this lesson intrigues me. Anyway, debt collection law dates way back to the B.C. era. This is because even in simple agrarian societies, there existed people who are owed a debt-creditors, and those that owe a debt-debtors. Societies needed to develop laws to deal with this relationship. These laws did not treat debtors fairly and in fact, were quite harsh. Their idea of debt relief was debt prison or debt slavery. In the Roman times, multiple creditors could divide you into parts and hold those parts up for ransom. So, who would want to buy your parts? Relatives of the debtor would pay the ransom because it was believed that a person could not crossover into the afterlife unless you were buried with all of your parts. Despite the laws being more punitive than rehabilitative, there was some recognitition that people suffer financial hardships due to no fault of their own. The Old Testament mentions a jubilee year that occurred every fifty years and in that year, your debts would be released. Here is the beginning of the concept of discharging debts. Even the famous Babylonian King Hammurabi added a law to his code that released the debts of farmers whose crops were destroyed due to a storm. Thankfully, we have progressed to more forgiving laws that offer true debt relief to those experiencing financial difficulty. This progression became even more necessary when economies became more complex and debt relief was needed to stimulate a free-flowing market. Yes, bankruptcy helps grow the economy. Without this form of relief, entrepreneurs would be less likely to take chances with a new venture. However, while we have recognized that laws providing for debt relief are an integral part of our society, the cynicism that surrounds bankruptcy has not completely disappeared. This has caused those that face financial hardships to be filled with undue shame and embarrassment. With the recent discussion of convalescent plasma, it had me thinking about the word convalescent and how it relates to bankruptcy. Bankruptcy is a convalescent vehicle for those who are experiencing financial hardships. If you look up the definition of "convalescent," it means one who is recovering from either an illness or an operation. You stay at a convalescent center to rehabilitate or to recover. An individual or business who files for bankruptcy protection is seeking to rehabilitate or to recover from a financial setback. In a chapter 7 bankruptcy, the debtor is seeking to discharge debts while retaining exempt assets. In a chapter 13 or a chapter 11, the debtor is seeking to restructure debts under a plan and to rehabilitate. So, bankruptcy is the "convalescent home" for an individual or business suffering from financial difficulties. We do not shame a person who is seeking to recover from an injury or illness. Likewise, any negative connotations that are pinned to bankruptcy are inappropriate. We have evolved from this type of thinking. Disregard the stains that may attach to a bankruptcy filing and view it for what it is. Bankruptcy is a vehicle to help those in financial need to get back on their feet.
Kimberly Berson is a bankruptcy attorney with over 25 years of experience. She also is an assistant adjunct professor of legal studies and instructs paralegal courses. You may contact her at 516-847-5122 or kbersonlaw@gmail.com.
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