Although the practice of incarceration for debtors existed for centuries in Europe, the earliest record of a debtor’s prison in America dates back to Salem, Massachusetts in 1678.  It was determined that almost two out of three Europeans that came to America in the seventeenth and eighteenth centuries arrived as debtors.  Many were indentured servants, required to labor for years to work off paying the cost of their voyage to the New World.  Debt was an inescapable fact of life in early America and the right to imprison debtors was unquestioned.  The irony of debtor’s prison was that prisoners were expected to repay their debts while provided no means to do so.  For those lucky enough, re-compensation usually came from family members or friends with a vested interest in the debtor’s freedom.

American bankruptcy law took a different approach in Colonial America.  People facing bankruptcy in Pennsylvania in 1785 were frequently flogged in public and could be subjected to having their ear nailed to a post or actually cut off. The bankruptcy petitioners were branded on the thumb with a “T” for thief and this method of punishment was used to ensure that no one would lend to them again.  By 1800, imprisonment for debt was under attack and insolvency was no longer seen as a moral failure when a justice of the Supreme Court and the richest man in America faced imprisonment for their debt. This altered the political dimensions of debtor relief leading to the highly controversial Bankruptcy Act of 1800; a short-lived bankruptcy act that allowed debtors to still be imprisoned but they could no longer be legally put to death for insolvency. The act also forgave certain classifications of debtors, permitted the discharge of debts, and allowed debtors to manipulate friendly creditors into giving them better terms.

The Bankruptcy Bill of 1841 allowed for a full discharge of debt unless fifty percent of the lenders opposed and many of the features of bankruptcy from this bill are still in effect today.  As the barbaric methods of debt collection began to normalize and the brutal punishments became the subject of much public discourse, the necessity of debtor’s prison lessened until they were abolished in 1849. Even back then, the idea of harsh punishment was recognized as counterproductive to the alleged goal of re-compensation.

For centuries, bankruptcy was viewed as a shameful process but fortunately today most people recognize its many benefits.  Emotionally, debt is an overwhelming problem that makes the future hard to face and bankruptcy is a tool to use during financial hardship.  “The development of bankruptcy legislation has been toward relieving the honest debtor from oppressive indebtedness and permitting such a debtor to start afresh.” Wright v. Union Central Life Ins. Co., 304 U.S. 502 (1938).

To sum it up, bankruptcy laws provide a legal procedure by which a debtor obtains relief from the demands of his creditors.  Although bankruptcy has become more acceptable, even today filing for bankruptcy is not an easy decision for some because of the stigma passed down throughout history.  Many view themselves as failures and socially set apart because they could not manage their money and this is why hiring a qualified bankruptcy attorney will make all the difference in the world.  Not all attorney’s practice bankruptcy law and since laws have changed and become more complicated, it is imperative to hire an attorney who specializes in bankruptcy.  With over 30 years experience in bankruptcy law, Robert H. Pflueger focuses exclusively on helping people eliminate their debt.  Filling bankruptcy is a very personal issue that must be considered carefully from all sides so for more information or to schedule a consultation, please call Orlando Bankruptcy Law Firm today.