History of bankruptcy law

The history of bankruptcy law begins with the first legal remedies available for recovery of debts. Bankruptcy is the legal status of a legal person unable to repay debts.

In Ancient Greece, bankruptcy did not exist. If a man owed and he could not pay, he and his wife, children or servants were forced into "debt slavery", until the creditor recouped losses via their physical labour. Many city-states in ancient Greece limited debt slavery to a period of five years and debt slaves had protection of life and limb, which regular slaves did not enjoy. However, servants of the debtor could be retained beyond that deadline by the creditor and were often forced to serve their new lord for a lifetime, usually under significantly harsher conditions.

In Judaism and the Torah, or Old Testament, every seventh year is decreed by Mosaic Law as a Sabbatical year wherein the release of all debts that are owed by members of the Jewish community is mandated, but not of "gentiles". The seventh Sabbatical year, or forty-ninth year, is then followed by another Sabbatical year known as the Year of Jubilee wherein the release of all debts is mandated, for fellow community members and foreigners alike, and the release of all debt-slaves is also mandated. The Year of Jubilee is announced in advance on the Day of Atonement, or the tenth day of the seventh Biblical month, in the forty-ninth year by the blowing of trumpets throughout the land of Israel.

In Islamic teaching, according to the Quran, an insolvent person was deemed to be allowed time to be able to pay out his debt. This is recorded in the Quran's second chapter (Sura Al-Baqara), Verse 281, which notes: "And if someone is in hardship, then let there be postponement until a time of ease. But if you give from your right as charity, then it is better for you, if you only knew."

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