Bankruptcy stems from Latin words “bancus” – meaning bench – and “ruptus” – meaning broken. In old Italy, bankers operated in public markets or fairs, on a bench. If one of these bankers became insolvent and was no longer able to operate his business, he would break his bench to let the public know. This would alert his customers and public that he could no longer do business with them.
The first law to be enacted in England regarding bankruptcy was put into effect in 1542. The Statute of Bankrupts dealt with insolvency in a harsh way, forcibly removing all of an individual’s belongings for creditors. A much harsher law, enacted in East Asia by Genghis Khan, called for the death of anyone who was bankrupt three times.
Thankfully, modern bankruptcy laws are significantly more lenient. Instead of strictly punishing the debtor, many of these laws look to the possibilities of reorganization and resolution of an individual’s or company’s financial insolvency.