Personal bankruptcy is a way of getting protection from your creditors. Bankruptcy has been around since biblical times (take a look at Deuteronomy 15), and has been used as a means for people to obtain relief from burdensome debts.
The U.S. bankruptcy laws are formulated to give the “honest” debtor a “fresh” start. Bankruptcy is intended to level the playing field between people who owe money and the people they to whom they owe money.
In medieval Italy, when a businessman did not pay his debts, it was the practice to destroy his trading bench. From the Italian for broken bench, “banca rotta,” comes the term bankruptcy. In England, the first bankruptcy laws considered a bankrupt person to be a criminal and subject to punishment ranging from prison to the death penalty. Modern bankruptcy laws, however, emphasize rehabilitating (reorganizing) debtors in distress.
Bankruptcy is a necessary safety valve in our economy. Without bankruptcy, people that are over their head financially would give up or become part of the underground. Society benefits when people file for bankruptcy because it enables them to return to productivity.