Bankruptcy

failure in business; inability to pay one's debts. The Italian money changer sat on a "banca" or bench. When he failed his bench was broken up or ruptured, and he was a bankrupt. Punishment for debt was formerly very severe. The Hebrew's wife and children were sold into slavery to pay debt. In Rome an unfortunate debtor became the slave of the man he owed. In England one who failed to meet his debts was ordered by the court to pay, and if he neglected to do so, he was thrown into prison for disobedience, -so ran the legal fiction,--and stayed there at his own expense for food, fire, and clothing until, by compromise with his creditors or in some other way, he carried out the order of the court. The cruel spirit of 1663, the age when Carolina was peopled by debtors, is expressed by Justice Hyde in these words: "If a man is taken, and lies in prison for debt, neither the plaintiff, at whose suit he is arrested, nor the sheriff who takes him, is bound to find him meat, drink, or clothes. He must live on his own, or on the charity of others, and if no one will relieve him, let him die in the name of God, says the law, and so say I." See Dickens' Little Dorrit for an account of life for twenty-three years, father and child, in the debtors' prison at Marshalsea.

It does not appear that the American colonists enacted laws for the imprisonment of debtors, but the practice prevailed. Authorities threw debtors into prison, just as a matter of course, in accordance with the English custom, under what is known as common law. Excessive cruelty does not appear to have prevailed in this country, and yet it is not pleasant reading to know that Robert Morris, the financier of the American Revolution, was thrown into prison for his debts, and died there. Whittier has expressed his indignation in The Prisoner for Debt. In later days merciful views have prevailed. By giving over all his property, a business man may receive a discharge from legal obligations, and may start anew in the world. Many have in this way built up new fortunes, and have turned back in a spirit of honor and have paid up old obligations.

Our constitution gives Congress authority to enact bankruptcy laws. Three such laws, 1800, 1841, 1867, were passed and subsequently repealed. In the absence of a national law, laws were enacted by each state. Under a new federal law taking effect July 1st, 1898, any person may appeal to the federal court for the division of his property among those he owes, and for permission to begin again free from debt. Anyone who has gotten into debt to the extent of a thousand dollars, and who is not a wage earner, is not a tiller of the soil, can be brought into court, and can be forced to assign his property for the benefit of his creditors in any one of the following cases: (1) His having concealed or transferred any of his property with intent to hinder, delay, or defraud his creditors. (2) Transferring any of his property to a creditor to give him an advantage over other creditors. (3) Suffering a creditor to obtain an advantage over other creditors by legal procedure.

The creditors, or the court, appoint a trustee whose duty it is to convert the bankrupt's property into cash and distribute it ratably. At the proper time the bankrupt is discharged, and may not be held for old debts. Bankruptcy proceedings begun under state laws prior to July, 1898, were, of course, finished under state law. All state laws relating to bankruptcy are now suspended, but they would come into effect again were the federal law repealed.

The number of American bankruptcies and the total amount of liabilities may be read by years in Dun's Review:

There were in the United Kingdom in 1905, 4,978 bankruptcies with liabilities of $30,535,000. The record for Germany in that year was 9,511 bankruptcies and $100,000,000 liabilities.