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Bankruptcy, Deadbeats and Peons: A blast from the past

In a lighthearted Finance in History series, CFO Magazine follows the thread of Bankruptcy back to its origins.

Here are just a few of the juicy tidbits:

  • The word “bankruptcy” comes from an Italian practice of the Middle Ages — “banca rotta” — which means “bench-breaking.” The term describes the punishment administered to businesses that failed: local fiscal authorities came to the market and smashed the bankrupt business’s table.
  • The first known effort to regulate bankruptcy appeared in the Code of Hammurabi, which dates to Babylon around the 18th century B.C.. The law stipulated that a bankrupt’s possessions were to be divided among creditors in proportion to the amount of money each was owed.
  • By 621 B.C., when Draco ruled Athens, the punishment meted out to “deadbeats” (literally, one who is “completely exhausted”) was death..
  • In the 13th century, if you were lucky you might end up a “peon,” a term that originally described a bankrupt person condemned to work without pay for a creditor until the debt was paid off.

If you enjoy history, this is a quick but fun read. Maybe the bankruptcy rules these days aren’t that bad?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.