Happy Fourth!!
With the Fourth of July coming up it is time to take a look back at what our Founding Fathers thought of bankruptcy and just how much bankruptcy has changed since then. The national holiday celebrates the passage of the Declaration of Independence on July 4, 1776.
Thomas Jefferson himself had seen financial struggles first hand. A Virginia planter, it was not unusual for debt to pile up. The unreliability and inadequacy that came with farming meant that Jefferson’s debt would only continue to grow. Furthermore, it is rumored he was not the most financially knowledgeable and would spend large amounts on food and wine (1). Although he now appears on the nickel, he was far from the token of financial wisdom.
The Constitution states that Congress has the power to,“establish uniform laws on the subject of Bankruptcies throughout the United States”. The concept of enforcing clear standards on the discharging of debts in the nation ensured that individuals would be protected from state to state and could not be imprisoned in a different state for not paying their debts. Although this was enacted in the Constitution, the first bankruptcy law did not pass until 1800 and only stayed active until 1803.
The First Bankruptcy Act of 1800 was based solely off the action of creditors and did not allow for individuals to file for themselves. The law only lasted three years because of corruption and favoritism that came along with it. The next bankruptcy act did not come until 1841. This bill allowed debtors to file for themselves which was inspired by the financial crisis of 1837. This law was later repealed in 1841 due to the discharging of what some felt was too much debt. The nearly permanent Bankruptcy Act did not come until 1898. This Act was later reformed in 1978 which introduced the Means Test to comprehensively determine if individuals qualify for Chapter 7 or 13 Bankruptcy. This reform also incorporated mandatory credit counseling and debtor education (2).
Bankruptcy laws have come and gone over the years but the same idea stays true. American individuals have always had and always will have the chance to start again. As a pro bono legal office, we can further attest that bankruptcy is a vital tool that will continue to change individual’s lives for the better.
We hope that everyone has a safe and fun 4th tomorrow! #nonprofit #4thofJuly #Boston pic.twitter.com/EgMb2ODwJ8
— MDRF – Massachusetts Debt Relief Legal Aid (@ProBonoBK) July 3, 2019
- “Famous People Who Have Filed Bankruptcy” Merritt & Hagen, APC. 2017.
- “History of Bankruptcy in the United States” Haynes, David. 3 January 2019.