Republic of Debtors: Bankruptcy in the Age of American Independence

by Bruce H. Mann

Debt was an inescapable fact of life in early America. At the beginning of the eighteenth century, its sinfulness was preached by ministers and the right to imprison debtors was unquestioned. By 1800, imprisonment for debt was under attack and insolvency was no longer seen as a moral failure, merely an economic setback. In Republic of Debtors , Bruce H. Mann illuminates this crucial transformation in early American society. From the wealthy merchant to the backwoods farmer, Mann tells the personal stories of men and women struggling to repay their debts and stay ahead of their creditors. He opens a window onto a society undergoing such fundamental changes as the growth of a commercial economy, the emergence of a consumer marketplace, and a revolution for independence. In addressing debt Americans debated complicated questions of commerce and agriculture, nationalism and federalism, dependence and independence, slavery and freedom. And when numerous prominent men--including the richest man in America and a justice of the Supreme Court--found themselves imprisoned for debt or forced to become fugitives from creditors, their fate altered the political dimensions of debtor relief, leading to the highly controversial Bankruptcy Act of 1800. Whether a society forgives its debtors is not just a question of law or economics; it goes to the heart of what a society values. In chronicling attitudes toward debt and bankruptcy in early America, Mann explores the very character of American society.

Genres: History, Nonfiction, Finance, Economics, American History

Hardcover

First published January 15, 2003

Reviews

[Frank Stein · Rating 4 out of 5]

Though often tedious, this is a real feast for those interested in business or legal history.

Mann is great at relating a world of bankruptcy so different from our own its hard to imagine and at times even hard to explain. For one, until Pennsylvania enacted a temporary bankruptcy statute in 1785, there was really no such thing as "bankruptcy," where one's old debts were discharged. Before that there were a host of "insolvency" statutes, where debtors could be released from jail if they pledged their property or sometimes indentured themselves to their creditors, sometimes for up to seven years. "Gaol Delivery Statutes" and "Poor Debtors' Oaths" worked on similar principles for the impoverished insolvent, but none of these actually removed the old debts.

Of course in this time, jail was a common end for bankrupts, and, strangely, since the goal of jail was to force the debtor to offer up hidden assets or for his family to pay off the creditors, debtors were treated worse than the criminally imprisoned. The state provided them with no food or water or even a room in the jail to which they were confined. Everything had to be purchased with their ever-dwindling funds. Even wealthy debtors like William Morris sometimes had to live in the hallways and stairways until they could buy a room from the jail keepers (In the New Gaol jail in New York City, debtors even organized a constitutional system with judges, fines, and elected officers to keep order in their otherwise confused world). An even stranger imprisonment for debtors was the self-imposed kind. In the colonial era, civil summons could not be delivered to people in their homes, so many debtors would spend months or years "keeping close," locked up in their own houses against bailiffs waiting to serve process, except on Sundays, when they could go free without fear. Mann has some fun pointing out the obvious absurdities of some of these policies, which prevented debtors from working to recover and repay their debts.

Like many social legal histories, though, the book is larded down with innumerable individual cases that can become extremely tiring. The latter half of the book, when the political debates over bankruptcy become clear, has a clearer narrative. There, Mann shows that the passage of the first federal bankruptcy act, in 1800, was partially about expanding the number of Federalist judges in an accompanying act, who would have to administer all the new bankruptcy cases. Republicans were afraid that this would provide more patronage for Federalist politicians, and Virginia planters were afraid that federal bankruptcy would lead to distress sales of landed estates, which were protected under their state law. In any case, both the bankruptcy act and the judiciary act would be repealed when Jefferson and the Southern Republicans came into power. A permanent bankruptcy act wouldn't be put in place until 1898.

The book, written back in 2002, is dedicated to Elizabeth Warren, back before she was famous, and in the acknowledgements says it was partially inspired by her, who worked with Mann at Harvard Law at the time. The worst part of the book, however, is when he uses Warren to try to draw contemporary lessons from this history. The book actually shows that this colonial and early republican world of bankruptcy is almost impossibly distant from our own, and that's its most worthwhile contribution.

[Vincent Li · Rating 4 out of 5]

A pretty interesting book on the bankruptcy laws and politics of the early republic. At parts, relatively technical, but mostly entertaining. The most interesting parts of the history probably relate to the existence of debtor's prison (which is pretty foreign to modern minds). Often debtors put in prison were commercially powerful men (at a time without credit scores, the only way to accumulate a debt was to be someone worthy of lending to). Debtors printed their own newspapers while imprisoned (raising the irrationality of creditors trying to recover money from their debtors by confining them physically. The real point was to put pressure on relatives to bail out the debtor), and in one instance even organized their own government within the prison with a constitution and officers to enforce it. Some other early 18th century idiosyncrasies seem quite quaint to modern eyes. Debtors could not be arrested in their own house or on Sunday (Sabbath), so often prominent debtors could avoid debtor's prison by refusing to leave home except on Sundays (with the pre-caution of avoiding being captured and held until Monday). Morris put off debtor's prison for a long time, conducting all his business at home and carefully screening visitors. The book explores the culture and legal changes in the early republic, through the lens of increasingly sophisticated credit instruments (from simple IOUs to assignable instruments) and the Bankruptcy Act of 1800. A major point in the book was the increased sympathy for debtors, in particular as socially prominent merchants who fell on hard times, that may have lead to the short lived Bankruptcy Act.

Overall, an interesting, if somewhat niche read for most. For the legally minded, this book was somewhat influential in the supreme court case of Central VA Community College, where the court held for originalist reasons that the bankruptcy clause of the constitution abrogated state sovereign immunity, a rare exception from Seminole Tribe (after all, how many other books can there be on bankruptcy in the early republic?).

[Bennett W · Rating 3 out of 5]

incredibly detailed. almost to a fault

[Kerensa · Rating 4 out of 5]

Read this for a class on law in the early republic, but it's a fascinating (highly detailed) read for anyone interested in the topic.

[Benjamin Crumm · Rating 4 out of 5]

Probably the best book on this particular subject (early American treatment of debt and the first American bankruptcy law). The author clearly did his research and does a good job interweaving overarching themes with personal accounts.

[Ben · Rating 4 out of 5]

Traces the transition over the course of the 18th century in public discourses on debt from a moral failure toward becoming an issue of economics - although only when applied to certain classes of merchant in certain situations, not like, poor people or anything.

[Samrat · Rating 5 out of 5]

Engrossing. You never think of how the difference between insolvency and bankruptcy matters these days, but it was clearly very real for the colonials. Today's easy(?) entry and exit from bankruptcy seems unimaginable from the perspective outlined here.

[Evan Thomas · Rating 4 out of 5]

Very readable history of bankruptcy and insolvency in American history. This is the kind of book you want to both underline things and jot notes for future paper ideas. Good font too.

[Linda · Rating 4 out of 5]

As a bankruptcy lawyer, I found this book fascinating! Bruce Mann explores the topic from the lack of money in colonial America to the shame of debtors' prisons. Masterful job.

[Danielle]

Really interesting book, especially having had the opportunity to discuss it with the author. Bruce Mann is one of America's preeminent legal historians. Dense topic, but a good read.

[Mr. Monahan · Rating 4 out of 5]

In Republic of Debtors Bruce H. Mann provides the reader with a well-documented account of colonial and early Republic microeconomics. His work is framed around the short-lived Federal Bankruptcy Act (1800-1803) and thoroughly details the lives of numerous debtors and creditors in the era prior to and contemporary of this controversial federal law. At stake, in Mann’s opinion, was the nature of debt itself. Mann identifies a group of well-minded lawmakers and public figures who recognize the harsh 18th century economic realities and subsequent frequency of debt, or more appropriately, insolvency. In the eyes of this progressive minded consortium, bankruptcy was a logical and moral step for the fledgling Republic to undertake. The other discernible contingency argues for strict punitive reprisals for gross debtors; and rails against the morally corrupt who brought such shameful predicament unto themselves. However, like with all great dichotomies, there is an inevitable grey area. In this case, it occurs in the difference between those who become bankrupt as a result of uncontrollable market factors and those who become bankrupt as a result of vices like greed, naiveté, or excessive consumerism. This gray area, in essence the questions of creating a—perhaps legally defined—two tired definition of bankruptcy (or at least eligibility for the leniency that could be granted by the federal government) emerges. This type of double standard often meant that despite being equally bankrupt, wealthy merchants or businessman were perceived as victims of natural business forces, while bankrupt farmers were seen as morally corrupt.

According to Mann, a legal historian himself, this inequity is a flaw in the Republic that must be resolved. Ultimately, I feel his portrayal of this period is consistent with his arguments, and his evidence is both appropriate and convincing. In fact, at times the argument is somewhat redundant, but I won’t count that against him since a lawyer can never be too sure of his argument.