In the beginning, bankruptcy was a creditors remedy. It existed so the creditors could seize the property of a trader who was behind in payments and have him thrown in jail until his debts were paid. From the late 1600s to early 1800s these jails, modeled after the debtor’s prisons in London, were like workhouses. The debtor would work off the debt, or the family would have to come up with the money to pay the debts balance to get him out of jail.
In the United States in 1833, debtors prisons were banned under federal law. Several states followed suit and banned the practice of locking up debtors.
Bankruptcy serves as credit protection and debtor relief today. It helps creditors by providing a controlled environment for the settlement of the debtor’s affairs and the distribution of assets. While also providing a safe place for the debtor to get relief from the pressures of debt.
Debtors and creditors have two different agendas; it is almost impossible to create laws that will benefit both parties every time. The bankruptcy rules are flexible enough to allow for different interests.
Fortunately, we don’t have debtors prison anymore, if you have overwhelming debt and are struggling to make the minimum monthly payments, contact a McAllen bankruptcy attorney to find out what your options are.