BANKRUPTCY (Bank + Lat. raptus, broken, from rumpere, to break. It. Lance rotia, usually taken to refer to the former Italian cus tom of destroying the money-counter when a hank failed). In popular usage, the inability of a person to pay his debts, or the financial condi tion of one who has failed in business; as a technical law term, the status of one who has been adjudged a bankrupt.
The legal position of a debtor in primitive com munities is one of great hardship. He is at the mercy of his creditor, who, after exhausting the property of the debtor. may generally seize his body and force hint to work out the debt or be come a. slave. With the development of society, various devices are resorted to for the ameliora tion of the debtor's condition. terminating. as a rule, in a more or less satisfactory system of bankruptcy, the cardinal principal of which is that one who is unable to pay his debts in full may be discharged therefrom upon giving up all his property for ratable distribution among his creditors. The history of bankruptcy and in solvency legislation in England furnishes a good illustration of this statement. While it is true that there was no process of the common law by which a man could pledge his body or sur render his liberty for the payment of his debts, the courts permitted a legal fiction to grow up that a debtor who did not pay a judgment against him was guilty of a breach of the peach, subjecting his body to imprisonment by the writ of copies ad rcspondendam. The feelings of judges toward debtors, during that period. are disclosed by a recorded opinion of Mr. Justice Hyde, in 1fi63: "If a man is taken in execution, and lies in prison for debt, neither the plaintiff, at whose suit be is arrested, nor the sheriff, who took hint, is bound to find him meat, drink, or clothes. Be must live on his own, or on the charity of others; and if no man will relieve him, let him die, in the name of God, says the law, and so say 1." A little more than a cen tury prior to this utterance the first bankruptcy statute was passed in England. It shows that Parliament agreed with the judiciary in its opin ion of insolvent debtors—that they were dis honest, and deserved punishment. This act (34 and 35 Hen. c. 4) was entitled, "Against such as do make Bankrupt," and recites that "divers and sundry persons, craftily obtaining into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses. not minding to pay or restore to any, their creditors, their debts and duties, but of their own wills and pleasures consume the substance obtained by credit of other men for their own pleasure and delicate living, against all reason, equity and good conscience." It then proceeded to confer upon various judicial officers power to take the offending debtors and their property; to sell the latter, and to divide the proceeds ratably among creditors. Under
Elizabeth and James I., additional bankruptcy statutes were passed, all keyed to the same note of suspicion and harsh judgment of the failing debtor. The act of 21 James I. (c. 19) was espe cially severe, providing that the debtor who could not render some just reason why lie be came bankrupt, should stand upon the public pillory, have one of his ears nailed thereto, and then cut off. Tf his failure to pay his debts was due to fraudulent practices, he might be put to death.
With the growth of English trade, the hazards of commercial enterprises were so multiplied, and the complexity of business relations so in creased that this Draconian legislation against failing- debtors was found to be not only unjust but impolitic. Accordingly, bankruptcy laws underwent a radical change. until, in Black stone's time, they were considered "as laws cal culated for the benefit of trade, and founded on principles of humanity as well as justice; and to that end," adds the great commentator. "they confer some privileges, not only on the creditors, but also on the bankrupt or debtor himself. On the creditors, by compelling the bankrupt to give up all his effects to their use, without any fraudulent concealment; on the debtor, by free ing him from imprisonment and discharging him from his debts, if he had been honest." These laws, however, applied only to traders, because it was thought that they were, "gen erally speaking, the only persons liable to acci dental losses," and that it was "an unjustifiable practice for any person but a trader to ineumber himself with debts of any considerable value." Those who were not traders could get relief from imprisonment for debt only to the extent pro vided by an entirely distinct set of statutes, those relating to insolvency (q.v). Although Blackstone describes the bankruptcy laws of leis age in the most optimistic vein, deeming them, as he (lid almost every other branch of English law, the perfection of human reason, they have been modified repeatedly during the last hundred years. Thirty-eight bankruptcy acts have been passed in England, beginning with that already mentioned under Henry V111., and, for the present, closing with the act of 1S83, as amended in 1890. These statutes have been a series of experiments, and although the latest had for its motto, "The estate for the creditor, not for the debtor, nor for the trustee," it can not be considered a finality, for it has not ac complished its avowed purpose of satisfying the creditor class. This is shown by the fact that nearly one-half of the business insolvencies in England are liquidated under deeds of settle ment or voluntary compositions with creditors outside of the bankruptcy court.