Debt's Dominion: A History of Bankruptcy Law in America

by David A. Skeel Jr.

Bankruptcy in America, in stark contrast to its status in most other countries, typically signifies not a debtor's last gasp but an opportunity to catch one's breath and recoup. Why has the nation's legal system evolved to allow both corporate and individual debtors greater control over their fate than imaginable elsewhere? Masterfully probing the political dynamics behind this question, David Skeel here provides the first complete account of the remarkable journey American bankruptcy law has taken from its beginnings in 1800, when Congress lifted the country's first bankruptcy code right out of English law, to the present day.


Skeel shows that the confluence of three forces that emerged over many years--an organized creditor lobby, pro-debtor ideological currents, and an increasingly powerful bankruptcy bar--explains the distinctive contours of American bankruptcy law. Their interplay, he argues in clear, inviting prose, has seen efforts to legislate bankruptcy become a compelling battle royale between bankers and lawyers--one in which the bankers recently seem to have gained the upper hand. Skeel demonstrates, for example, that a fiercely divided bankruptcy commission and the 1994 Republican takeover of Congress have yielded the recent, ideologically charged battles over consumer bankruptcy.


The uniqueness of American bankruptcy has often been noted, but it has never been explained. As different as twenty-first century America is from the horse-and-buggy era origins of our bankruptcy laws, Skeel shows that the same political factors continue to shape our unique response to financial distress.

Genres: Law, History, Nonfiction

300 pages, Paperback

First published January 1, 2001

About the author

David Arthur Skeel Jr. is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania, and the author of Icarus in the Boardroom (Oxford, 2005) and Debt’s Dominion: A History of Bankruptcy Law in America (Princeton, 2001), as well as numerous articles and other publications. He has been interviewed on The News Hour, Nightline, Chris Matthews’ Hardball (MSNBC), National Public Radio, and Marketplace, among others, and has been quoted in the New York Times, Wall Street Journal, Washington Post and other newspapers and magazines. Skeel has twice received the Harvey Levin award for outstanding teaching, as selected by a vote of the graduating class, and has also received the University’s Lindback Award for distinguished teaching. In addition to bankruptcy and corporate law, Skeel also writes on sovereign debt, Christianity and law, and poetry and the law, and is an elder at Tenth Presbyterian Church in Philadelphia.

Reviews

[William Schram · Rating 4 out of 5]

Bankruptcy in America has a unique history. Initially, the power to prosecute and punish bankruptcies was stated in the United States Constitution to Congress in Article 1 Section 8. It was taken almost directly from English Common Law but evolved over time due to political influences.

Debt’s Dominion by David A Skeel Jr discusses those events and influences through five major periods of time. The book starts out with 1898. Prior to this year, a number of attempts were made to pass legislation on Bankruptcy, but they were all repealed. With the lack of Federal input or powers, the individual states were forced to have their own insolvency laws, but they ran into issues with jurisdiction when someone could run to another state and avoid being punished. So the first chapter focuses on why this particular series of laws worked when none of the previous ones did.

I don’t know much about Bankruptcy Law. I know that you have to file for it and it costs money to do so. I know that there are several different levels of protection based on what you are and how much you are able to pay or something. I picked this book up because it seemed interesting. It is relatively short, but the font is pretty small so that makes up for it. The book was initially printed in 2001, so it might be a bit dated. I never needed to file for Bankruptcy, and don’t really follow the field. There might have been some things that were added due to the Enron debacle and the entire series of events with the 2008 Housing Bubble. There were massive changes due to the 1929 Stock Market Crash so it only stands to reason that they might have done something similar.

Despite my initial misgivings, this book was really informative.

[Frank Stein · Rating 3 out of 5]

This is the first book to look at the whole history of federal bankruptcy law in America, from the creation of the first permanent statute in 1898 through the 1978 Bankruptcy "Code" and to the contemporary battles between creditors and debtors.

From a writer and thinker as gifted as Skeel, however, the book is a little disappointing, with much of it demonstrating little research, and some points and facts repeated ad nausem. Still, for those looking for a straight history, or just a good introduction to what bankruptcy law is in America, this provides lots of guidance and information. This book also provides a nice chronological extension of Bruce Mann's "Republic of Debtors" on colonial and early American bankruptcy law.

Skeel argues that it took so long to establish a permanent bankruptcy act in America because so many different politicians had different goals in pushing it. Some obviously wanted to help creditors and pushed for "involuntary" bankruptcy which could be imposed on debtors who committed certain "acts of bankruptcy"; others, often from the West and the South, wanted to help debtors and argued for enacting only "voluntary," or debtor-initiated bankruptcies. Skeel shows how these disagreements, and others, led American bankruptcy law to differ markedly from British, which it once imitated. While the Brits by 1883 created official bankruptcy administrators, who supervised debtors and divvied out claims, and who could refuse bankruptcy entirely or require more payments to anyone who came in, the 1898 act in America was created by people concerned about an imposition on states rights, and worried about another federal bureaucracy, so judges in America do most of the bankruptcy work (along with pseudo-judges, then known as bankruptcy "referees"). A similar concern lead these lawmakers to defer to states on their "exemption" laws, which shielded either a minimum amount of a debtor's income or property or, most often, land from creditors. The result was an act much less systematic and much kinder to debtors than anywhere else.

The next evolution of the law, the 1938 (Chandler) Bankruptcy Act, was created largely by then S.E.C. Chair and future Supreme Court Justice William Douglas. His main goal was the break up the "bankruptcy ring" centered around a few Wall Street law firms and banks that had monopolized most corporate reorganization filings and had supposedly charged exorbitant fees. The act thoroughly reformed corporate bankruptcy to be more like the British system, with federal "trustees" who would take over a company and administer it back to health, in what was then known as Chapter X. There was an outlet, however, for those firms who did not want a federal administrator, and that was Chapter XI, supposedly for small firms but gradually extended over time. The 1978 code broke this wide open, however, and allowed all sorts of corporations to file for reorganization, to the relief of almost all, who agreed that the trustees had prevented firms from ever filing from bankruptcy in the first place. The code also brought bankruptcy back to America's law schools and made it a respectable practice once again.

Skeel does do a good job showing the importance of bankruptcy law throughout U.S. history. For instance, he shows that the 1978 reforms in some ways lead to the explosion of corporate raiding and takeovers in the 1980s, since firms were more willing to take on debt and risk bankruptcy if they didn't have to worry as much about a federal trustee coming in and kicking out management. He also shows that the the U.S.'s bankruptcy practices' remain distinct from almost every other country, which often require draconian repayments and refuse discharges to most entering bankruptcy. His book provides a glimpse of why the US has the most generous and forgiving bankruptcy laws on Earth, and what that has meant for our country.

[Stephen · Rating 5 out of 5]

This is a great introduction to thinking about bankruptcy in the United States and one take about why it is the way it is. Quite an excellent read!