Persons Who May Be Released From Debt

In an early case on circuit, Justice Livingston suggested that inasmuch as the English statutes on the subject of bankruptcy from the time of Henry VIII down had applied only to traders it might “well be doubted, whether an act of Congress subjecting to such a law every description of persons within the United States, would comport with the spirit of the powers vested in them in relation to this subject.”1421 Neither Congress nor the Supreme Court has ever accepted this limited view. The first bankruptcy law, passed in 1800, departed from the English practice to the extent of including bankers, brokers, factors, and underwriters as well as traders.1422 Asserting that the narrow scope of the English statutes was a mere matter of policy, which by no means entered into the nature of such laws, Justice Story defined bankruptcy legislation in the sense of the Constitution as a law making provisions for cases of persons failing to pay their debts.1423

This interpretation has been ratified by the Supreme Court. In Hanover National Bank v. Moyses,1424 it held valid the Bankruptcy Act of 1898, which provided that persons other than traders might become bankrupts and that this might be done on voluntary petition. The Court has given tacit approval to the extension of the bankruptcy laws to cover practically all classes of persons and corporations,1425 including even municipal corporations1426 and wage-earning individuals. The Bankruptcy Act has, in fact been amended to provide a wage-earners’ extension plan to deal with the unique problems of debtors who derive their livelihood primarily from salaries or commissions. In furthering the implementation of this plan, the Supreme Court has held that a wage earner may make use of it, notwithstanding the fact he has been previously discharged in bankruptcy within the last six years.1427

Footnotes

1421
Adams v. Storey, 1 Fed. Cas. 141, 142 (No. 66) (C.C.D.N.Y. 1817). [Back to text]
1422
2 Stat. 19 (1800). [Back to text]
1423
2 J. STORY, COMMENTARIES ON THE CONSTITUTION OF THE UNITED STATES 1113 (1833). [Back to text]
1424
186 U.S. 181 (1902). [Back to text]
1425
Continental Bank v. Rock Island Ry., 294 U.S. 648, 670 (1935). [Back to text]
1426
United States v. Bekins, 304 U.S. 27 (1938), distinguishing Ashton v. Cameron County Dist., 298 U.S. 513 (1936). [Back to text]
1427
Perry v. Commerce Loan Co., 383 U.S. 392 (1966). [Back to text]