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Bankruptcy Law Blog

Friday, July 28, 2017

As American As Apple Pie

What do bankruptcy and apple pie have in common? They were both invented elsewhere but popularized in America. Apple pie was brought over from Europe, along with the apples necessary to make it, but has since become a cultural icon. Bankruptcy has roots that stretch as far back as the Biblical era, but was not popularized until America’s Founding Fathers were brave enough to experiment with it.

At the time of our nation’s founding, few other countries allowed debtors to file for bankruptcy. Those who could not pay their debts were more likely to be imprisoned or sold into slavery than given debt relief.

Article 1, Section 8, Clause 4 of the United States Constitution authorizes Congress to enact “uniform Laws on the subject of Bankruptcies throughout the United States.” Although the Constitution was enacted in 1787, Congress did not decide to pass a bankruptcy law until 1800. There is some speculation that it was finally inspired to do so after Robert Morris, a prominent Philadelphia merchant who signed the Declaration of Independence and virtually bankrolled the Revolution, was confined to debtors prison.

That first bankruptcy law was quite different from the laws we have today. Originally, only a debtor’s creditors could petition a court for bankruptcy, and the debtor could not do anything to stop the proceeding. Most of a debtor’s assets would be sold, and the profits would be split among the creditors. Remaining debts could then be forgiven if the creditors gave the okay.

Today, the debtor is the one in control; nobody can be forced to file for bankruptcy. A debtor also gets to decide what type of bankruptcy to file. Filing under Chapter 7 results in assets being liquidated to pay off debts and most remaining debts being forgiven immediately. Filing under Chapter 13 allows the debtor to hold on to his or her assets because it puts the debtor on a structured repayment plan for a few years, then forgives most debts.

We’ve come a long way over the past 200+ years, and our laws continue to evolve. Although we did not invent bankruptcy, other countries look to our law as a model to follow.


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Padgett and Robertson assist clients with Bankruptcy, Personal Bankruptcy, Consumer Bankruptcy, Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and The New Bankruptcy Law in Mobile, Alabama and throughout southern Alabama. Alabama State Bar Association Regulations require the following: "No representation is made that the quality of the legal services to be performed is greater than the quality of legal services performed by other lawyers." 11 U.S.C. 528 of the U.S. Bankruptcy Code requires the following: "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.”



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