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The first bankruptcy law was enacted in England in 1542 during the reign of
Henry VIII, and was heavily biased against the debtor where he could be
jailed and all his assets seized. With time, the law was relaxed to allow
debtors out of prison , many of whom promptly fled to the debtors colonies in
Georgia and Texas. Even as imprisonment became rarer in the 1800s,
collusive bankruptcy (agreed upon by creditor and debtor) became legal in
1825. Voluntary bankruptcy was authorized in England in 1849.
When the United States Constitution was adopted in 1789, bankruptcy was
specifically mentioned as being subject to federal law. The first US
bankruptcy law was passed in 1800 and provided only for involuntary
proceedings. Voluntary bankruptcy was legalized in 1841 and its scope
expanded by subsequent legislation in 1898 and 1938. The Bankruptcy
Reform Act of 1978, commonly known as the Bankruptcy Code, made major
changes to bankruptcy law.
In 1986, the Bankruptcy Judges, United States Trustees, and Family Farmer
Bankruptcy Act made considerable changes relating to family farmers and
established a permanent trustee system. In recent years, the Bankruptcy
Reform Act of 1994 has enacted changes that affect the mortgage banking
industry. At present, there exist six types of bankruptcy under the
Bankruptcy Code, located at Title 11 of the United States Code: