History of Bankruptcy – Part 5

Written by: Robert DeMarco
Bankrupt Laws of England – The Middle Ages
Laws concerning the debtor and creditor relationship, however, began anew in the late Middle Ages. This societal shift, in the context of England, is explained below by the United States Supreme Court.

The nature of the population of England in feudal times [Middle Ages], develops the cause. The different counties of England were held by great lords; the greater part of the population were their villains; commerce hardly existed; contracts were infrequent. The principal contracts that existed were with the lords and their bailiffs, the leviers of their fines and amercements, receivers of their rents and money, and disbursers of their revenues.

Sturges v. Crowninshield, 17 U.S. 122, 140 (Wheat. 1819). The Court then continues, listing the first statutes enacted concerning imprisonment for debt.

In the year 1267, imprisonment for debt was first given against the bailiffs, by the statute of Marlbridge, 52 Hen. III., c. 23; Burgess 18, 19; F. N. B. Accompt, 117. The statute of Acton Burnel, 11 Edw. I., gave the first remedy to foreign merchants, by imprisonment, in 1283. The statute 13 Edw. I., c. 2, gave the same remedy against servants, bailiffs, chamberlains, and all manner of receivers. Burgess 24, 27. These instances show how imprisonment for debt first commenced, how few were at first included, and accounts for the non-existence of legal insolvency.

Sturges, 17 U.S. 122 at 140 -141.
As the Middle Ages waned and commerce increased it became clear that debt became necessary for the growth of society. “Trade cannot be carried on without mutual credit on both sides: the contracting of debt is therefore here not only justifiable, but necessary.” Blackstone, Commentaries, Bk. II, ch. xxxi, p. 474.
As the use of debt increased, England instituted a variety of laws concerning debt relief. Such laws evolved along two different fronts. One set of laws, commonly referred to as bankrupt laws, were directed to debtors engaged in business, whereas the other set of laws, referred to as insolvency laws, covered the remainder of debtors. Justice Blackstone explained:

[England allows] the benefit of the laws of bankruptcy to none but actual traders; since that set of men are, generally speaking, the only persons liable to accidental losses, and to an inability of paying their debts, without any fault of their own. If persons in other situations of life run in debt without the power of payment, they must take the consequences of their own indiscretion, even though they meet with sudden accidents that nay reduce their fortunes: for the law holds it to be an unjustifiable practice, for any person but a trader to encumber himself with debts of any considerable value. If a gentleman, or one in a liberal profession, at the time of contracting his debts, has a sufficient fund to pay them, the delay of payment is a species of dishonesty, and a temporary injustice to his creditor: and if, at such time, he has no sufficient fund, the dishonesty and injustice is the greater.

Blackstone, Commentaries, Bk. II, ch. xxxi, p. 473-4. Insolvency laws were nothing like the bankrupt laws. See infra.  For the most part the English laws on insolvency related to the nature, extent and duration of imprisonment. Insolvency laws were initiated in response to 19 Hen. VII, c. 9 (1503), “which gave like process in actions of the case and debt, as in trespass, [and] is the true basis of the right, or wrong, of general imprisonment.” Sturges, 17 U.S. 122 at 141; 19 Hen. VII., c. 9 (1503). The beginnings of insolvency laws began with the statute 8 Eliz., c. 2 (1566), which “restricted the right of imprisonment, and guard[ed] against its abuses.” Sturges, 17 U.S. 122 at 141; 8 Eliz., c. 2 (1566) (proof by declaration was required and costs were awarded the defendant for delay, discontinuance and nonsuit). Various proclamations issued over the years to follow, which proclamations were subsumed into 22 & 23 Car. II, c. 20 (1670).  Sturges, 17 U.S. 122 at 142. The 1670 Act was the first great regular insolvent act and “the model of all that follow; its provisions and language having been copied by the subsequent parliaments in England, and by our colonial legislatures, with almost unvarying exactness.” Id.
DATED:  July 5, 2013
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