Bankruptcy may be defined as the legally declared ability of an individual or organization to pay their creditors, who represent a third party which provided, to the individual or organization, a product or service for which they are legally entitled to receive full settlement.
As part of a process called involuntary bankruptcy, a creditor may institute bankruptcy proceedings against a debtor in order to secure the funds for which they are owed. However, in the majority of cases, such proceedings are not required. Under the difficulties of a voluntary bankruptcy, the bankruptcy process is initiated by the debtor, which means that it is filed by the bankrupt individual or organization.
In the Old Testament of the Bible and Hebrew Scriptures, the laws of Moses laid down that one Holy or Jubilee Year should take place every 50 years. Accordingly, on this day, all debts would be expunged from all Jews, and all debt slaves would be freed from their encumbrances, this being part of a heavenly command.
In fact, the Hebrew or Jewish law of debt forgiveness, can be found in the Bible, in the book of Deuteronomy 15: 1-2 which gives gives clear instructions on the release from debt of all encumbered individuals every seven years. In the book of Nehemiah chapter 5, there is an entry relating to debt forgiveness among the Jewish repatriates to Jerusalem.
Further, bankruptcy did not exist in ancient Greece, which refers to the period from circa 1100 BC and the Dorian invasion, to 146 BC and the Roman request of Greece after the battle of Corinth. In such times, only locally born adult males could be classified as citizens. Accordingly, it was only the fathers who were entitled to legal ownership of property. Thus, every member of his family would be forced into what was called debt slavery if a father was unable to settle his outstanding debts. This would include his wife, children and servants. Such a status would have been retained until the creditor had received due compensation by way of their combined physical labor.
In many city states in ancient Greece, debt slavery was restricted to a period of five years, and debt slaves were given the protection of life and limb, which regular slaves did not enjoy. On the other hand, servants of the debtor were not so fortunate. In fact, they could have retained beyond the five year deadline by the creditor and were often forced to serve their new master for possibly even a lifetime, usually under significantly harsher conditions.
The term Bankruptcy has its origins in the ancient Latin word bancus, which refers to a long bench or possibly a table, and ruptus which means broken. The term bank originally referred to a bench.
The first bankers positioned this bench in public places, in markets, fairs, and such like, and upon which they incurred their financial affairs. They also wrote their bills of exchange, which was a written order by the drawer, who withdrew the funds, to the drawee, the banker, to pay money to the payee, who requires the funds.
Therefore, when a banker's business failed, he broke his bank, that is to say his bench. In this way, the public would have made aware of the fact that the person to whom the bank belonged was no longer able to continue his banking business.
Bankruptcy – How To Succeed