Article I, Section 8, Clause 4:

[The Congress shall have Power . . . ] To establish an uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; . . .

The Bankruptcy Clause grants Congress power to enact uniform, national laws governing bankruptcies in the United States.1 In the colonial period, domestic bankruptcy and insolvency matters were governed by each colony’s individual laws. After ratification of the Constitution, state law continued to govern bankruptcy and insolvency matters until Congress passed the first federal bankruptcy law in 1800.2 States retained the ability to enforce their own bankruptcy laws in subsequent periods when there was no national law.3

While early English bankruptcy law at the time of American independence existed merely as a collective remedy for creditors and applied to a narrow category of debtors, neither Congress nor the Supreme Court has ever accepted the view that, under the Bankruptcy Clause, Congress may only enact laws of the type that governed England in the Eighteenth Century. Over the years, Congress has expanded the coverage of bankruptcy laws, increasingly enlarging the scope of relief afforded debtors and the rights of creditors and other parties.4 However, in exercising its bankruptcy power, Congress is subject to certain constitutional limitations, including the requirement that it enact “uniform” bankruptcy laws.5

When no national bankruptcy law exists, the states may enact and enforce their own bankruptcy and insolvency laws. During the country’s first eighty-nine years under the Constitution, a national bankruptcy law existed for only sixteen years in total.6 Congress’s enactment of a national bankruptcy law does not invalidate conflicting state laws, but only suspends them.7 Upon repeal of a national bankruptcy statute, conflicting state bankruptcy laws again come into operation without the need for re-enactment. 8

The following essays examine the history and meaning of the Bankruptcy Clause. They first review the historical background of the Clause. They then consider how the Supreme Court has interpreted the scope of the Clause and constitutional limitations on Congress’s exercise of its bankruptcy power. Finally, they review general restrictions on state bankruptcy power.

Footnotes

1

U.S. Const. art. I, § 8, cl. 4.

2

Act of April 4, 1800, ch. 19, 2 Stat. 19 (repealed 1803); see ArtI.S8.C4.2.6 Restriction on State Bankruptcy Power.

3

See ArtI.S8.C4.2.6 Restriction on State Bankruptcy Power.

4

See ArtI.S8.C4.2.3 Scope of the Federal Bankruptcy Clause.

5

U.S. Const. art. I, § 8, cl. 4; see ArtI.S8.C4.2.3 Scope of the Federal Bankruptcy Clause.

6

See ArtI.S8.C4.2.6 Restriction on State Bankruptcy Power.

7

See ArtI.S8.C4.2.6 Restriction on State Bankruptcy Power.

8

See Tua v. Carriere, 117 U.S. 201, 210 (1886); see ArtI.S8.C4.2.6 Restriction on State Bankruptcy Power.