From the earliest days of “money” as we know it, there have been people who have run into financial difficulties and debt. Sometimes it is the result of unforeseen circumstances, sometimes extravagance, sometimes bad management, but the end result is the same.
One of the first cultures to have a set of rules to deal with this situation were the Babylonians. Their “Code of Hammurabi”, in 2000BC, stipulated a bankrupt’s possessions to be divided among creditors in proportion to the amount of money each was owed.
The most widely-accepted theory on the origin of the word “bankruptcy” comes from a mixing of the ancient Latin words bancus (bench or table) and ruptus (broken). When a trader or banker, who originally conducted his public marketplace transactions on a bench, was unable to continue to meet obligations, the bench was broken in a symbolic show of failure. This continued into the Italian Renaissance period when the practice was known as Banca Rotta.
Many cultures were unsympathetic – the Romans, and more recently, the English and French were amongst those who prescribed the death penalty for bankruptcy although there is little evidence that this was frequently exercised. Other punishments included slavery and debtors’ prison. In England you could be pilloried and have one ear nailed to the pillory and then cut off!
Far more civilised and considerate were the ancient Jews. As according to Mosaic Law cancelled fellow Jews their debts every seven years. Similarly, Muslims took a more tolerant view to debt. I understand the Qur’an states if a debtor is in difficulty “grant him time till it is easy for him to repay”.
Despite a more constructive approach these days, financial problems can cause a huge amount of stress. Charles Dickens (who as a child lived in debtors’ prison for a time) demonstrated this through the character of Mr Micawber. Micawber stated “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”