It may not surprise many to read that bankruptcy has not always existed. However, it is not the case that debt has not been pursued in other ways throughout history. Although the methods have been different, it has never been permissible to sneak out of a debt that you could pay – and even, in some cases, when you couldn’t. In ancient Greece, for example, a man who owed money but could not repay it would be punished by “debt slavery”. He, his wife, and any children or servants would be forced to recoup the loss through physical labor. The city authorities would limit the term of debt slavery to a period of five years for the debtor and family, but servants could be kept beyond that time.
The title “bankrupt” is believed to derive from ancient Rome. The Latin words bancus for “bench” and ruptus for “broken” refer to the practice that would be observed by Roman bankers who were no longer in a position to carry out business. These bankers would operate in a similar way to how modern banks do, taking in and doling out money in markets and at fairs, and creating a profit margin for themselves by giving loans. If they ended up in a position where they could no longer do their job they would literally break their bench. Bancus ruptus. This demonstrated that they could no longer do business. Although the practice has obviously died out, the word remains in the English language.
It is possible for an entire nation to become bankrupt. In fact, between the years 1557 and 1596, King Philip the Second of Spain declared state bankruptcies on four occasions. Spain was the first ever sovereign nation to have to declare bankruptcy. Although there were other countries with their financial troubles at the time, Spain was the only one which declared bankruptcy. It is perhaps no coincidence that during this era Spain was repeatedly attacked by its long-time rival, England.
In 1705 the concept of discharging debts was introduced to bankruptcy in the English-speaking world. As a reward to bankrupts who showed good faith in gathering together whatever money the could to be paid towards the debt, the remainder of their debts was written off. This is now a standard aspect of any modern-day bankruptcy.
The approach taken to bankruptcy and debt in East Asia in the 1200s was perhaps a little less conciliatory, with Genghis Khan believed to have stipulated that anyone who became bankrupt for a third time should be subject to the death penalty.
In the Torah, every seventh year is designated as a Sabbath year, when the release of all debts owed by the community is mandated by Jewish law. Every seventh Sabbath year (the 49th in the cycle) is then followed by the Jubilee year (from which we get the term for a fiftieth anniversary of a coronation as seen with Kings and Queens of Britain). In Jubilee Years, all debts are released for the community, foreigners and debt slaves.
Disclaimer: This article is for informational and entertainment purposes only, and should not be construed as legal advice on any subject matter.
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