In Ancient Israel, every 7th year (Sabbatical year) the debtors were forgiven some of their debt and every 50 years (the Jubilee year) all debts were to be discharged, some mortgages released and all indentured servants and slaves were to be released. In the meantime, the family members had the right to make payments on any property or persons that had been seized to satisfy the debt.
In Ancient Greece and Republican Rome, debtors suffered death, slavery, mutilation, imprisonment or exile. Roman Republic Law allowed multiple creditors to exhibit a debtor in the forum for three days and divide the debtor up into pieces to satisfy the debt.
Evidence exists suggesting multiple creditors could also seize a deceased debtors corpse and hold it ransom from the debtor’s heirs until the debt was satisfied.
As Rome became an empire, approximately the second century AD, debtor slavery had been abolished, debtor prison continued to exist. The debtor could be held for ransom until friends and family of the debtor paid the debt.
In the middle ages, the church proclaimed debt and insolvency sinful. Debtors were subject to excommunication while alive or denial of a Christian burial upon death. Punishment of debtors was necessary to assist the land-owning and religious ruling classes in maintaining their power.
The first bankruptcy laws arose in the late middle ages. The laws provided the protection of fraud against creditors stemming from an inequitable distribution of assets and the protection of the debtor from imprisonment.
In 1283 authorizing the seizure of debtor’s assets to satisfy debt. If the assets seized were insufficient to satisfy the debt, then imprisonment of the debtor was incurred until the debt was paid.
In 1542 in England, the first known bankruptcy law was passed to give creditors options against debtors who did not pay their debts. Under this law, the debtors were considered criminals.
In 1570, England passed its second bankruptcy law, among other things; bankruptcy was initiated by the creditor and involuntary for the debtor. Once the debtor’s assets were seized, sold and distributed to the creditors the debtor was not relieved of the debt and creditors could continue their collection efforts.
English debtors prior to 1705 rarely knew forgiveness of debt.
England enacted a statute in which creditors could receive a full discharge of debts, while being able to retain exempt property provided certain conditions were met.
In 1823 when Charles Dickens was 12 years old, his father was sent to debtor’s prison at Marshalsea. Charles started working in a boot factory for 10-hour days to pay for his lodging and help support his family.
Debtors act of 1869 is an English statute that abolished imprisonment for debt except in certain cases, as when a debtor owed a debt to the Crown or a debtor had money but refused to pay. The statute also made it a misdemeanor to obtain credit under false pretenses or to defraud creditors.
In America up to the mid 1800’s you could go to prison for not paying your debts. In 1898 the Bankruptcy Act allowed both voluntary and involuntary cases. Debtors could keep exempt property and discharge virtually all debts. In 1938 the bankruptcy laws were overhauled by Congress and the law that exists today is the Bankruptcy Act of 1978. Several amendments and changes have been since then.