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Conclusion and Epilogue

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

The conclusion reviews four themes in the evolution of bankruptcy and bankruptcy law. First, long run growth in personal bankruptcy comes from growth in the supply of credit at the extensive margin. ... More

The conclusion reviews four themes in the evolution of bankruptcy and bankruptcy law. First, long run growth in personal bankruptcy comes from growth in the supply of credit at the extensive margin. Businesses regularly invented new ways to grow through consumer lending, and the relaxation of usury restrictions facilitated riskier loans. Second, state laws governing the collection of debt are key to interpreting geographic and temporal patterns in bankruptcy. The interaction of state collection law and bankruptcy law caused bankruptcy rates to be higher in states with pro-creditor collections. Pro-creditor collection law also magnified the effect of the growth in the credit supply and the effect of recessions on the bankruptcy rate in those states. Third, people matter. A small number of individuals had outsized influence on the history of bankruptcy. Fourth, stories matter. Beliefs about bankruptcy are typically expressed in stories about what brings people to bankruptcy. In some stories, debtors are driven to bankruptcy by unscrupulous creditors or economic crises. In other stories, unscrupulous debtors take advantage of overly generous laws, imposing the cost of their default on others. The direction bankruptcy reform took depended upon which story carried the day.Less

The “Worldly Cares and Business” of Friends

A. Glenn Crothers

in Quakers Living in the Lion's Mouth: The Society of Friends in Northern Virginia, 1730-1865

Chapter 3 explores the way in which Quaker business ethics and success, and Friends' economic contributions to the regional economy, their civic concerns, and social respectability enabled them ... More

Chapter 3 explores the way in which Quaker business ethics and success, and Friends' economic contributions to the regional economy, their civic concerns, and social respectability enabled them during years of peace to escape the pariah status they had held during the American Revolution and become respected members of the mercantile and agricultural communities of northern Virginia. As they prospered and created economic networks that helped sustain the community, however, many Friends became embedded in the economic and social life of the region, in the process becoming dangerously entangled in speculative ventures and slave-based industries that diverged from their religious and ethical convictions. In short, economic success and growing public acceptance intensified rather than resolved the tensions that arose from living in a society that violated their testimonies on a daily basis.Less

11. Cost Control Failure

Lynn M. Lopucki and Joseph W. Doherty

in Professional Fees in Corporate Bankruptcies: Data, Analysis, and Evaluation

Previous chapters described competition among some bankruptcy courts for the cases of the largest public companies. To succeed in that competition, the bankruptcy courts must abandon the effort to ... More

Previous chapters described competition among some bankruptcy courts for the cases of the largest public companies. To succeed in that competition, the bankruptcy courts must abandon the effort to control fees. Bankruptcy professionals will not steer their clients to courts that will control the professionals' fees. That puts the competing courts in a bind. The Bankruptcy Code and Rules require that the courts control professional fees, specify the precise methods by which they are to do it, and bar the courts from relaxing the requirements. The competing bankruptcy courts have responded to this dilemma by going rogue, routinely authorizing and tolerating professional fee practices that violate the Bankruptcy Code and Rules. Because most bankruptcy judges are unwilling to adopt illegal practices, most bankruptcy courts have dropped out of the competition. The effect has been to clear a path to victory for judges willing to adopt illegal practices. This chapter documents three such practices empirically: the Ordinary-Course-Professionals Practice, the Prior-Payment-Disclosure Practice, and Disburse-First-and-Decide-Later Practice.Less

The Intended and Unintended Consequences of the 1898 Bankruptcy Act

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

Chapter 2 examines the origins and consequences of the 1898 Bankruptcy Act. The authors of the law were business owners who wanted an efficient procedure to deal with the failure of other businesses. ... More

Chapter 2 examines the origins and consequences of the 1898 Bankruptcy Act. The authors of the law were business owners who wanted an efficient procedure to deal with the failure of other businesses. They gave little thought to personal bankruptcy, and the law that they designed for businesses erected no substantial obstacle to the discharge of consumer debt. As access to consumer credit expanded, personal bankruptcy grew both relative to business bankruptcy and in absolute terms. However, personal bankruptcy did not grow evenly across the U.S. Households sought the protection of bankruptcy law mainly in states where garnishment of wages was easy. The growth in personal bankruptcy led to a shift in beliefs about the causes of bankruptcy and the purpose of bankruptcy law. Initially, creditors, debtors, legislators, judges and other legal professionals agreed that the purpose was to satisfy the claims of creditors efficiently. By the end of the 1920s, many interested parties stressed the importance of providing relief to debtors, who were portrayed as victims of unscrupulous creditors such as loan sharks. The increase in bankruptcy also led to changes in organized interest groups. Legal professionals began to work alongside creditors to try to shape the law.Less

Personal Bankruptcy after World War II

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

The bankruptcy rate was very low during World War II, but it increased quickly after the war ended. As growth in consumer credit returned to its pre-Depression trend, so did growth in the personal ... More

The bankruptcy rate was very low during World War II, but it increased quickly after the war ended. As growth in consumer credit returned to its pre-Depression trend, so did growth in the personal bankruptcy rate. Bankruptcy grew everywhere, but it rocketed past its previous peak in states with pro-creditor garnishment. Although personal bankruptcy increased, few cases were filed under Chapter XIII. Demand by debtors for Chapter XIII probably was not as great as its Depression-era advocates imagined it to be. People rarely used the procedure for spreading payments over time except in places where bankruptcy referees pushed it.Less

The Renegotiation of the Relationship between Consumers and Their Creditors

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

Pro-creditor garnishment law was a key driver of the bankruptcy rate for the first two-thirds of the twentieth century, but it did not survive the consumer rights movement of the 1960s. By 1970, ... More

Pro-creditor garnishment law was a key driver of the bankruptcy rate for the first two-thirds of the twentieth century, but it did not survive the consumer rights movement of the 1960s. By 1970, Congress and the Supreme Court limited the ability of states to maintain and enforce pro-creditor collection laws. Chapter 5 shows that the federal restrictions on garnishment law, especially the Consumer Credit Protection Act, reduced the state-to-state variation in the bankruptcy rate and caused the national bankruptcy rate to level off. Although the growth of bankruptcy in the 1950s and 1960s led to calls for reform of federal bankruptcy law, the effort moved slowly. By the time recommendations for bankruptcy reform were made to Congress, bankruptcy rates were no longer regarded as a problem. Almost all of the changes to personal bankruptcy in the 1978 Bankruptcy Reform Act encouraged debtors to file.Less

The Triumph of the Consumer Creditor

Mary Eschelbach Hansen and Bradley A. Hansen

in Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century

Bankruptcy rates rose after 1978. The debtor-friendliness of the 1978 changes set the stage for a new bankruptcy crisis, but the increasing importance of banks that issue credit cards was the most ... More

Bankruptcy rates rose after 1978. The debtor-friendliness of the 1978 changes set the stage for a new bankruptcy crisis, but the increasing importance of banks that issue credit cards was the most important force. The Supreme Court’s 1978 decision in Marquette National Bank of Minneapolis v. First Omaha Services Corp. led directly to the growth in the market for credit cards. Banks could now profit from offering cards to high-risk consumers, and this put more people on the path to bankruptcy. Card issuers used some of their profits to lobby for changes to bankruptcy law. Studies by creditor-funded organizations, such as the Credit Research Center, supported a narrative in which lax bankruptcy law and lack of stigma led households to file for bankruptcy even when they could pay, imposing a so-called bankruptcy tax on honest debtors. In 2005, Congress passed a bankruptcy reform bill supported by banks and credit card companies, over the objections of many legal professional, scholars, and even some creditors. Today personal bankrupts must use Chapter 13 repayment plans unless they can show that they do not have sufficient income to repay. Credit card issuers won the argument that retailers began in the 1930s.Less

Income Tax Evasion, Medicare Fraud, Organized Crime, Environmental Disputes, and Bankruptcy

James M. Denham

in Fifty Years of Justice: A History of the U.S. District Court for the Middle District of Florida

The chapter deals with income tax evasion, including beginning discussion of the high-profile Wesley Snipes prosecution. The chapter then turns to Medicare fraud prosecutions. The changing nature of ... More

The chapter deals with income tax evasion, including beginning discussion of the high-profile Wesley Snipes prosecution. The chapter then turns to Medicare fraud prosecutions. The changing nature of organized crime activity in Florida is the next subject covered in the chapter. The employment of “crews” and how they were prosecuted in the Middle District is included. Next the chapter turns to environment disputes, especially plaintiffs’ actions against large-scale developments considered to be outside federal guidelines. Issues such as manatee protection, protecting wetlands, and massive developments that violated existing rules and generally threatened the environment were often before federal judges. Middle District judges adjudicated endangered species questions as well. Finally the chapter turns to bankruptcy in the Middle District Court from 2000 to the present and a number of new additions to the Bankruptcy bar are featured.Less

Growing Pains, Constitutional Questions, and Bankruptcy, 1976–1980

James M. Denham

in Fifty Years of Justice: A History of the U.S. District Court for the Middle District of Florida

This chapter covers the dramatic growth the Middle District’s case load from 1976 to 1980. The increasing need for more judges and facilities to handle the growth is covered. In 1976 and 1979 ... More

This chapter covers the dramatic growth the Middle District’s case load from 1976 to 1980. The increasing need for more judges and facilities to handle the growth is covered. In 1976 and 1979 Congress passed acts to create the position of U.S. Magistrate. Magistrates could perform virtually any task undertaken by district judges except for trying and sentencing felony defendants. In 1971 the district appointed eight U.S. magistrates and they introduced in this chapter and their important role in the district is introduced. Jimmy Carter’s judicial appointments are introduced. The congested nature of judicial business in Orlando and Tampa is discussed. The important role of U.S. senators in the appointment process is discussed. Next the chapter turns to Constitutional questions in the Middle District of Florida, and issues such as school prayer, nude dancing, job discrimination, standardized testing, and issues involving abortion clinics and how they are handled by the court are discussed. Finally, the chapter covers bankruptcy as handled in the court up to 1980. Processes, some of the practitioners, judges, appropriate legislation, and some important cases are included.Less

Hope and Bitterness in the Reform of Russian Bankruptcy Law

Frederique Dahan

in Law and Informal Practices: The Post-Communist Experience

Although insolvency legislation appeared on the statute books of most of the countries of the former Soviet bloc, the actual practice of bankruptcy was mostly unknown under the state-controlled ... More

Although insolvency legislation appeared on the statute books of most of the countries of the former Soviet bloc, the actual practice of bankruptcy was mostly unknown under the state-controlled economy because debtors and creditors were generally arms of the state or were ultimately supported by it. As the conflicts of interests that inherently drive insolvency proceedings did not exist, debt recovery and the ‘orderly market exit’, which are seen as key elements of any insolvency law by Western lawyers, were not functioning. There is now a general recognition that bankruptcy legislation is essential for the process of transition. As a result, international financial institutions are pressing individual countries to reform their laws. This chapter examines the 1998 Russian Bankruptcy Law in the context of these objectives and the specific characteristics of Russian economic and social circumstances. It then considers the impact of such reform.Less

Consumer Bankruptcy Reform and the Heuristic Borrower

Susan Block-Lieb and Edward J Janger

in Law and Psychology: Current Legal Issues Volume 9

In April 2005, the US Congress enacted, and President Bush signed into law, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the ‘Bankruptcy Bill’), which made radical amendments ... More

In April 2005, the US Congress enacted, and President Bush signed into law, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (the ‘Bankruptcy Bill’), which made radical amendments to the US Bankruptcy Code. These changes had the principal effect of restricting the ability of consumers to discharge debt in bankruptcy. The Bankruptcy Bill was presented by its proponents – representatives of the consumer credit industry – as protecting innocent lenders from being duped. These proponents contributed vast sums to sympathetic legislators, and to legislators who they hoped would become sympathetic. This chapter explores whether the picture of the paradigmatic debtor they paint is empirically accurate. It shows that the factual assertions that ostensibly motivated the Bankruptcy Bill are belied by data and the consumer credit industry's own behaviour. It suggests an alternate story that is both more plausible, and more problematic. Consumers do not overborrow in reliance on the availability of the bankruptcy discharge. Instead, they borrow honestly, but heuristically, often in response to aggressive solicitations, and default if (and, by and large, only if ) their debt load becomes crushingly great.Less

Missing Debtors: National Lawmaking and Global Norm-Making of Corporate Bankruptcy Regimes

Terence C. Halliday, Susan Block-Lieb, and Bruce G. Carruthers

in A Debtor World: Interdisciplinary Perspectives on Debt

Corporate insolvency is about debt and it always involves debtor corporations as key stakeholders. It should, therefore, follow that stakeholders integral to everyday bargaining over debt management ... More

Corporate insolvency is about debt and it always involves debtor corporations as key stakeholders. It should, therefore, follow that stakeholders integral to everyday bargaining over debt management should also be integral to the meta-bargaining that produces the rules that govern everyday corporate bankruptcies. Such is not the case. In many historical circumstances—in countries with economies both advanced and developing; in situations of economic crisis and in ordinary times; in Europe, North America, and Asia—the stakeholders who mobilize to craft national bankruptcy law seldom include debtors. Debtors are also conspicuous by their absence from forums of global norm-making in which international financial institutions or international governance organizations create norms designed to guide national lawmaking. In short, a class of bankruptcy players for whom everyday bargaining over debt obligations is a matter of corporate life or death seldom appears in the forums that institutionalize the rules by which their individual fates are determined. How is this puzzle to be explained? This chapter examines hypotheses that address this issue through three research projects. The first studied the politics behind two landmark pieces of lawmaking in advanced economies—the US Bankruptcy Code of 1978 and the English Insolvency Act of 1986. The second project studied three Asian economies in the wake of the Asian Financial Crisis. The third project examines the decade-long initiatives by the UN Commission on International Trade Law to create global norms for corporate bankruptcy regimes.Less

Panel Discussion on Stability, Resolution, and Dodd–Frank

James R. Barth, John Dearie, David Skeel, and Arthur Wilmarth

in Perspectives on Dodd-Frank and Finance

In this panel discussion, John Dearie, Executive Vice President of the Financial Services Forum, lists several shortcomings of Dodd-Frank, but contends that the banking system is far stronger than it ... More

In this panel discussion, John Dearie, Executive Vice President of the Financial Services Forum, lists several shortcomings of Dodd-Frank, but contends that the banking system is far stronger than it was in 2008. Professor James Barth provides examples of regulators failing to supervise and regulate financial institutions properly and suggests a sentinel to oversee regulators. Professor David Skeel discusses the virtues of the single point of entry strategy for resolving troubled financial firms, and also expresses several concerns about the procedure. Professor Arthur Wilmarth raises questions about whether the new resolution procedures will incentivize banks to use even more short-term financing.Less

Henderson And Audubon 1818–1819

Lawrence M. Crutcher

in George Keats of Kentucky: A Life

George commits much of his inheritance to a steamboat investment proposed by his host John J Audubon. Audubon gives George a lesson in chopping wood. The investment sours, almost immediately. George ... More

George commits much of his inheritance to a steamboat investment proposed by his host John J Audubon. Audubon gives George a lesson in chopping wood. The investment sours, almost immediately. George decides to start over, in Louisville. Tom Keats dies in London, making available additional capital for George, who returns to England to claim it.Less

Summary of Discussion

Roger B. Porter, Robert R. Glauber, and Thomas J. Healey

in New Directions in Financial Services Regulation

This chapter consolidates the insights and findings discussed regarding the implementation of a possible regulatory structure that is fitting for the resolution of the 2008 financial crisis. It ... More

This chapter consolidates the insights and findings discussed regarding the implementation of a possible regulatory structure that is fitting for the resolution of the 2008 financial crisis. It discusses remarks on the endorsement of the creation of a resolution authority. It notes concern with resolution authority as well: that it may not be possible to prevent a permanent bailout operation. As an alternative, then, it has been suggested, the U.S. Bankruptcy Code is a better regulatory mechanism, also noting that more transparency should be instilled at the Federal Deposit Insurance Corporation. Also discussed in the chapter is the idea of making the Federal Reserve the regulator of systemic risk, which gathered a variety of responses. Finally, the chapter also summarizes the housing bubble—its decline as well as the possible causes for its downfall.Less

Poland: National Correspondents:

in Rescue of Business in Europe: A European Law Institute Instrument

Polish insolvency law regulations were subject to major reforms when the new Restructuring Law and revised Bankruptcy Law came into force on 1 January 2016. Responses provided in this document ... More

Polish insolvency law regulations were subject to major reforms when the new Restructuring Law and revised Bankruptcy Law came into force on 1 January 2016. Responses provided in this document reflect the state of the law applicable for that date, unless a specific reference to a later date is made. Less

Financial hardship: bankruptcy, insolvency, and medical charity

Alannah Tomkins

in Medical Misadventure in an Age of Professionalisation, 1780-1890

Bankruptcy and insolvency were the types of career turbulence that were most likely to interrupt medical careers. Insolvency might entail a stay in debtor’s prison. This chapter examines the ... More

Bankruptcy and insolvency were the types of career turbulence that were most likely to interrupt medical careers. Insolvency might entail a stay in debtor’s prison. This chapter examines the experiences of men who suffered financial setback and explores their access to support systems. The Royal Medical Benevolent Fund was established in 1836 and might have offered a prop, but analysis of their records suggests that medical bankrupts and insolvents were rarely among their beneficiaries. Therefore other sources of informal support must be inferred, beyond formal medical charity.Less