Bankruptcy 101
God forbid that you should ever file for bankruptcy, but then no one is perfect. Bankruptcy is essentially like everything in life that is basic such as family, birth, promotion, career-success and career-failures. It is a natural outcome of a process that involves a fair exchange of resources. When one end- yours- fails and you are asked to return or repay what you owe, it is simply fulfilling your obligation towards this exchange. And if you cannot pay up, your declaration of your inability to do so would be met with varying reactions that differ in era, culture and even religion.
Bankruptcy in the bible was first mentioned by Moses who declared that there should be a year when Jewish debts should all be absolved. In Greece, debtors were not so lucky; men who were the head of their households were required to give up more than their furniture to pay debts. Instead, the entire domicile of wife, children and slaves had to do slave-work. In Ancient Asia, woe to the person who declares bankruptcy three times; according to the draconian rules of Genghis Khan, the punishment for that one was death. And there is psychological bankruptcy declared by those who have given all but their dignity in such matters as love and relationships, only to receive nothing in return.
The etymology of the word itself is as varied and as interesting as the culture it is said to have originated from. Some say that it is from the Latin words for table and broken; the bankers of the day transacted on wooden tables and breaking them in public was a way of saying they were completely broke! From the Romans, there were the mensarii who had their tabernae in a public place and who, in a financial fix would with all the money that had been entrusted to them, thus leaving the person they owed to, bankrupt.
But bankruptcy today is as normal as filing for your tax return; at least it should feel that way simply because society is sympathetic to people who try. In fact, this sympathy and understanding translates to some of the most sympathetic laws ever defined to fulfill exactly that requirement; to give people a new start by allowing them to be relieved of most of their debts and given the appropriate measures to repay who their owe in an efficient and reasonable manner. Legally when one files for bankruptcy, there is exemption from paying debtors with the express understanding that one should offer non-exempt assets; these assets are then distributed by the court to the different creditors as payment. Businesses most often file for two kinds: reorganization and liquidation. When one chooses to reorganize, the debtor is allowed to reorganize his resources as well as its debts through maintaining his business; in this way, he can still repay debts with hope of salvaging the business. Through liquidation, all the assets must be sold to have the necessary cash to pay off all debts. Individuals as well can also apply for reorganization bankruptcy in order to recover or retain assets and pay off reduced creditor claims. Further legal protection is provided by the courts through a stay from any kind of lawsuit or forced enforcement of paying obligations. Implemented by statute law (varying in each state), bankruptcy is under Federal jurisdiction by the American Constitution.
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