A Short History of Canadian Bankruptcy

BenchA Short History of Canadian Bankruptcy - Where bankruptcy began

Critics of bankruptcy often give the impression it is a new invention. While there have been important changes to bankruptcy laws in recent years, there is nothing new about people and families suffering under the burden of extreme debt.

The word "bankrupt" is taken from the Italian word bancarupta, which means "bench broken" or "bank broken." It is believed this term alludes to the custom in the Medieval Ages of breaking a merchant's marketplace table upon failure to pay a debt. While the concept of "acts of bankruptcy" was developed in medieval Italy in response to insolvent traders, the concept of debt repayment is as old as civilization itself.

If anyone fails to meet a claim for debt, and sell himself, his wife, his son, and daughter for money or give them away to forced labour: they shall work for three years in the house of the man who bought them, or the proprietor, and in the fourth year they shall be set free. Hammurabi's Code of Laws (ca. 1792 - 1750 BC)

A Short History of Canadian Bankruptcy - Code of Hammurabi:

The Code of Hammurabi, written by King Hammurabi who ruled Babylon between 1792-1750 BC, contained one of the earliest attempts to set rules for settling debts.


A Short History of Canadian Bankruptcy - Ancient Greece and Ancient Rome:

Ancient Greece followed similar methods of debt repayment. However, by the 7th Century BC, the wealthy in and around Athens held so many of the poor in bondage that economic collapse and rebellion appeared likely. To avert potential disaster, the lawmaker Solon granted amnesty to many of those in bondage and outlawed contracts, which used a person's liberty as collateral for the debt.

Julius Caesar scaled down debts, enacted severe laws against excessive interest rates, and relieved extreme cases of insolvency by establishing the laws of bankruptcy essentially as it stands today.  45 BC  - The Story of Civilization, Caesar and Christ by Will Durant

Rome, in the 5th Century BC, studied Solon's reforms when it decided to codify its laws into the Law of the Twelve Tables. By the time Augustus ruled Rome (31 BC - 14 AD), a debtor could choose to give his property to his creditors, called a cessio bonorum, to avoid being seized himself. Due to worries about debtors who hid or squandered their property, by 379 AD, this method was only available to debtors whose insolvency was deemed to have been caused by an act of God.

A Short History of Canadian Bankruptcy - Bankruptcy in modern-day Canada

Substantive and procedural law benefits and protects landlords over tenants, creditors over debtors, lenders over borrowers, and the poor are seldom among the favoured parties. (John N. Turner, Attorney General of Canada, in a speech to the Canadian Bar Association, December 7, 1969.)

From 1958 to 1971 in Canada, the consumer bankruptcy rate was at a fairly constant level, and, for a modern industrialized country, the rate was actually very low. For example, in 1968, Canada had 6 bankruptcies per 100,000 population, whereas the United States had 90.

However, many low-income people and families from coast to coast were trapped in impossible debt situations with no relief available. In 1972, in response to recommendations from a special joint committee of the Senate and House of Commons on consumer credit and a special Senate committee on poverty, the Federal Government started the Poor Debtors' Assistance Program. As a result, in the period from 1972 to 1981, the bankruptcy rate rose steeply.

A Short History of Canadian Bankruptcy - Why Canada needs bankruptcy laws

The bankruptcy laws in Canada have a positive effect on the average Canadian taxpayer. Bankruptcy law helps promote enterprise in Canada by encouraging entrepreneurship. Bankruptcy law also acts as a social safety net for individuals which provides them a fresh financial start and integrates them back into mainstream society as tax paying citizens.

Encouraging Enterprise:
A research study by Wei Fan and Michelle White published in the Journal of Law & Economics, vol. 46:2, October 2003 found that locations with more lenient bankruptcy rules have higher levels of self-employed individuals, meaning that these regimes encourage enterprise. America’s liberal business bankruptcy laws are repeatedly cited as a factor in the US’ prodigious advantage over Europe in entrepreneurship.

The Wei Fan and Michelle White study concluded that families who are homeowners are about 35 percent more likely to own businesses if they live in states with high or unlimited rather than low homestead exemptions, and the difference is statistically significant. Renters are 29 percent more likely to own businesses if they live in high-exemption states, and this difference is also statistically significant.

Another significant factor in encouraging entrepreneurship is the fact that the business person who has a business that fails knows that he is entitled to a fresh financial start.

Social Safety Net for Individuals:
During the last 30 years, consumer debt has grown tremendously thanks to the increasing availability of credit cards and opportunities for debtors to take out second mortgages on their homes. Debt is not bad in and of itself. In fact, consumer debt has been one of the great dynamic factors in our economy. A high level of domestic consumption is required for both stability and growth in Canada.

However, society has recognized that it has a responsibility to those people who are unable to find solutions for debt repayment. Imagine if there was no debt relief. What would people hopelessly burdened with debt do? They would, without doubt, become part of the “underground” economy. They would not pay taxes. They could not accumulate assets and would be outcasts from society. This would not be good for them, their families, or society.

The Canadian government has recognized this and Canada’s bankruptcy laws have the following objectives:

• In the case of an individual, to permit an honest but unfortunate debtor to obtain a discharge from his or her debts.

• To provide for the orderly and fair distribution of property among the creditors.

• To allow an investigation to be made of the affairs of the bankrupt.

 

Find us at Google + https://plus.google.com/+EarlSands/posts?rel=author

Directory

Home

Canadian Law News

Lawyer Locator

Twitter Facebook Google +


Free Lawyer Listing

logoModern Law:

Law Overview

Dictionary

Aboriginal

Abortion

Administrative

Admiralty/
Maritime


Adoption


Agriculture

Antitrust/
Trade

Appellate Practice

Arbitration/
Dispute Resolution


Aviation/
Aerospace


Banking/
Business

Banking Access

Bankruptcy/
Insolvency

Bankruptcy History

Clarity Act

Communications

Constitutional

Construction

Consumer Protection

Contracts

Corporate

Criminal

Dating Violence

Dealing with Lawyers

Debt Collection

Divorce

Elder Law

Employment & Labour

Environmental

Family

Family Violence

Finance

Franchises

Fraud

Good Samaritan Laws


Government

Gun Laws

Hate Laws

Health & Medical

Human/Civil Rights

Information Technology

Immigration

Impaired Driving

Insurance

Intellectual Property

International

International Trade

Investments

Jury Duty

Legal Malpractice

Libel & Slander

Medical Malpractice

Mergers/
Acquisitions

Military

Paternity-Testing


Personal Injury

Poverty Law

Privacy & Access to Information

Products Liability

Professional Liability

Real Estate

Sharia Law

Snowbirds

Stalking

Starting a Business

Steps in a Lawsuit

Taxation

Transportation

Trusts & Estates

Unions

Whistleblowers

Wills And Probate

Witnesses

Workers Compensation


Young Offenders

Canadian Law Apps

logoAncient Law to the Present:

Hammurabi's Code

10 Commandments

Ancient Greece

Ancient Rome

Christian Influence

Justinian's Code

Magna Carta

Royal Proclamation 1763

Code Napoleon

British North America Act

Constitution Act, 1982

logoLegal Organizations:

Bar Associations

Courts

Governments

Law Schools

Law Societies

Legal Aid

logoLawyers:

Business Lawyers

Criminal Lawyers

Employment / Wrongful Dismissal Lawyers

Family / Divorce Lawyers

Immigration Lawyers

Impaired Driving Lawyers

Insolvency Lawyers

Personal Injury Lawyers

Real Estate Lawyers

Wills Estate Lawyers

List your Law Firm

Publish your Articles

logoDirectory:


Send to a Friend


Privacy Policy

About us