The first time a bankruptcy law was believed to be put into place was in England in 1542.  The law was meant to give creditors some remedies against the debtors who did not pay their debts.  Under the law, the debtors were considered criminals under the law.

In 1570, the country of England passed its second bankruptcy law which stated that only a creditor could start a bankruptcy case, the debtor had no choice in the matter.  Also, ordinary people could not be charged with bankruptcy.  Merchants were the only ones that could be known as a debtor, and their creditors could file bankruptcy against them.

Over the next 100 years or so, the British Parliament made some changes to the law, mostly to let the commissioner of the bankruptcy take more of the bankrupt's assets and to increase the penalties for not following the law.  A 1604 amendment to the law allowed for the debtor's ear to be cut off. In 1800, by one vote, the U.S. Congress passed the first American bankruptcy law.  The law was similar to the British law, although a fraudulent bankrupt could not be sentenced to death.  The law was repealed three years later.

The Modern American bankruptcy law started with the Bankruptcy Act of 1898.  This law allowed for the voluntary and involuntary filing of bankruptcy, allowed the debtors to claim some exemptions and also removed most barriers for discharging all debts. The Bankruptcy Act of 1978 was the next major change to the United States bankruptcy code.  This is the law as it existed up until the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005.