With Republic of Debtors, Bruce H. Mann, a professor of law and history at the University of Pennsylvania, paints a thoroughly researched and lively account of how America's unique view of debt and debtors emerged during the late 18th century and led to enactment of the first U.S. bankruptcy law on April 4, 1800.¹

Mann illustrates how the Act "was forged in the ideological debates that defined Revolutionary America—issues of commerce and agriculture, vice and virtue, slavery and freedom, dependence and independence, nationalism and federalism—but it settled none of them."² He shows that, with the rise of commerce, society came to view the financial collapse of businessmen as a normal part of risk-taking rather than moral degeneracy.³

Many of the issues discussed in the book have been debated by every generation, including our own, since the founding of our country. Mann's vivid accounts provide a historical context that is timely under the bankruptcy reform debates raging in Congress at this very moment.⁴ Financial failure is not merely an economic issue, but rather one with religious, moral, social, political, legal and ideological dimensions. Along the way, Mann shines new light on the culture of debt during the 1700s, paints vivid pictures of what it meant to be insolvent during this period and turns the spotlight on life in America's debtors' prisons.

At the dawn of the 18th century, most credit transactions were between people who knew each other. The most common form of credit was the account book, which simply chronicled purchases and payments. Frequently, there was not even an express promise to pay.⁵ In transactions between strangers, creditworthiness depended on a person's reputation as an honest and God-fearing individual.

As commerce expanded, so did the need for credit, which came to be memorialized by formal written instruments.⁶ Unlike book accounts, these instruments bore interest and were freely assignable, giving rise to a creditor class of investors and speculators as well as professional debt collectors.⁷

Arrest was the central element of civil debt collection. Suits were typically commenced by writs ordering the debtor's immediate arrest as a guarantee that he could appear in court. Once judgment was entered, a debtor's property could be seized and he could find himself jailed indefinitely. Fear of arrest gave rise to the practice of "keeping close," where debtors kept to their houses—sometimes for years—because the law everywhere prohibited sheriffs and constables from forcibly entering a person's dwelling to serve a writ.⁸ Debtors could venture outside on Sundays when writs could not be legally served, but there was no guarantee that they would not be abducted and turned over to the sheriff on Monday.

A few colonies—and later, states—enacted insolvency statutes, but they were short-lived and most did not discharge debt.⁹ But at least debtors could get out of jail by surrendering most of their property to creditors.¹⁰

Sometimes a truly indigent debtor with small debts and little property could gain release from jail after 30 days upon making a "poor debtor's oath," but most debtors were not so fortunate. In the absence of statutory insolvency procedures, some imprisoned debtors petitioned the legislature for individual relief. But few petitioners were so bold as to request a discharge of their debts; they merely sought release from jail and perhaps freedom from future arrest on condition that they assign all their assets for the benefit of creditors. Only about half of these petitions were granted, and concurrence of creditors was not even a guarantee of success.¹¹

Prof. Mann's extensive original research takes us into the largely unexplored world of debtors' prisons. In the 18th century, every colony, and later every state, permitted imprisonment for debt.¹² Unlike England, only two states (New York and Pennsylvania) had freestanding prisons exclusively for debtors.

Conditions within the prisons were severe. Unlike common criminals, debtors had to provide for their own food, clothing and fuel.¹³ One writer, speaking of Charleston's treatment of confined debtors, said that "[a] person would be in a better Situation in the French Kings Gallies, or the Prisons of Turkey or Barbary, than in this dismal Place."¹⁴

After the revolution, two separate debtors' prisons (based on the English model) were created—the New Gaol in New York City and the Prune Street Jail in Philadelphia.¹⁵ Articulate pleas¹⁶ from formerly wealthy and influential debtors housed in these institutions did not bring abolition of debtors' prisons for another 30 years, but they did lead to the enactment or our first national bankruptcy act, under which at least some of these formerly prominent men gained their freedom.¹⁷

When news of enactment of the Bankruptcy Act reached the New Gaol late in the spring of 1800, the debtors gathered to "celebrate the auspicious event" and drank a series of 17 toasts to the "Godlike act."¹⁸

Congress repealed the 1800 Act in December 1803, 18 months before it would have expired on its own terms. Most of the members of Congress supporting repeal were newly elected, suggesting that some, in running for election, may have pandered to anti-bankruptcy sentiment. The arguments for repeal were muddled and filled with charged rhetoric decrying widespread abuse by those "immoral" debtors who could pay their bills. (Sound familiar?)¹⁹ Even though the Act was short-lived and concerned only the mercantile elite,²⁰ it marked a milestone in America's emergence as a commercial nation, and the culture of debt.

Republic of Debtors is an important contribution to the written history of this country during the Revolutionary Age from a unique perspective, and is a genuinely entertaining and lively read. When all is said and done, Mann cogently points out that in a commercial economy, honor is no substitute for a good security interest, whether you live in the 18th or the 21st century.²¹

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Footnotes

¹ Act of Apr. 4, 1800, ch. 19, 2 Stat. 19 (repealed 1803). Return to article

² See Mann, supra at 254. Return to article

³ Merchants and businessmen were the elite of insolvents. It took 40 more years for bankruptcy relief to be offered to ordinary debtors. See Mann, supra at 258. Return to article

⁴ Also, see Warren, Charles, Bankruptcy in United States History (1935); Skeel, David Jr., Debt's Dominion (2001); Tabb, Charles Jordan, "The History of the Bankruptcy Laws in the United States," 3 ABI Law Review 5 (1995). Return to article

⁵ Book accounts were legally enforceable, but typically did not bear interest. See Mann, supra at 10. Return to article

⁶ These instruments took a number of forms: bonds (simple or conditional), bills obligatory, promissory notes and bills of exchange (the precursors of modern checks). See Mann, supra at 11. Return to article

⁷ Mann gives us a look at life as an 18th century collection lawyer through the eyes of William Samuel Johnson, a creditor's lawyer who left nearly a thousand letters describing his legal practice before the revolution. See Mann, supra at 19. Return to article

⁸ Although they could enter through an open or unlocked door, climb through an unsecured window, or trick their way in. See Mann, supra at 27. Return to article

⁹ The first published argument for outright bankruptcy discharges appeared in a brief, anonymously written pamphlet in 1755 entitled Some Reflections on the Law of Bankruptcy. See Mann, supra at 57. Return to article

¹⁰ Between 1755 and 1757, New York, Rhode Island and Massachusetts enacted bankruptcy laws that provided for discharging debt. Connecticut followed suit in 1763. Although these statutes expired or were repealed within a few years, their mere existence reflected changing attitudes toward business debt. See Mann, supra at 54. Return to article

¹¹ See Mann, supra at 75. Return to article

¹² See Mann, supra at 70. The first American writing criticizing imprisonment for debt was not published until 1754 in a pamphlet entitled The Ill Policy and Inhumanity of Imprisoning Insolvent Debtors, Fairly Stated and Discussed. See Mann, supra at 93, n. 11. Imprisonment for debt was abolished at the federal level in 1833, and many states followed suit in the 1830s and 1840s. See Tabb, supra at 16. Return to article

¹³ Mann says that a few statutes required that creditors maintain their debtors under certain circumstances, but the laws were sporadic and often ineffectual. See Mann, supra at 87. When yellow fever epidemics struck Philadelphia in the late 1790s, other criminals were evacuated, but not debtors. Public officials assumed that they bore no responsibility for the care or maintenance of imprisoned debtors. Id. at 99. Return to article

¹⁴ Woodmason, Charles, The Carolina Backcounty on the Eve of the Revolution: The Journal and Other Writings of Charles Woodmason, Anglican Itinerant, ed. Richard J. Hooker (Chapel Hill, N.C. 1953), 236. See Mann, supra at p. 86, n. 18. Return to article

¹⁵ The New Gaol was located in the northeast corner of the present City Hall Park. The Prune Street Jail was located at the present intersection of Locust and Sixth Streets. See Mann, supra at 86-86. Return to article

¹⁶ William Keteltas, "an impecunious lawyer with a flair for dramatizing humanitarian causes," who was imprisoned in the New Gaol, campaigned against imprisonment for debt. During the first six months of 1800, he published 25 issues of a pamphlet entitled Forlorn Hope. Nearly every issue drove home the point that convicted criminals fared better than imprisoned debtors. He noted that while the revised American criminal codes of the 1790s became more humanitarian, replacing whipping, ear-cropping, branding and other physical penaties with prison sentences of specified length, calibrated to the seriousness of the crime, imprisoned debtors were not included in this movement. See Mann, supra at 105. Return to article

¹⁷ In Chapter 5, "A Shadow Republic," Prof. Mann shows how imprisoned debtors brought the ideals of the American Revolution right into the debtors' prison. Although they had lost their independence as well as their wealth, their fall from financial grace did not mean that they have abandoned civility, order or legality. In the New Gaol, these debtors adopted a written constitution and created a "republic of debtors." See Mann, supra at p. 148. Like the framers of the recently ratified federal Constitution, these debtors understood that constitutional government implied limits. The only prisoners bound by the constitution were those who signed it. This debtors' constitution created officers, some elected by vote of the members, others appointed by elected officials. Similar to Article III judges, these judges served until they died, resigned or were otherwise liberated. Mann argues that this might appear at first blush as a form of recreation by people with time on their hands, but this is not the case. The creators of this "republic" were quite serious about devising a form of self-government embracing an appreciation for due process of law. Mann recounts a number of cases to illustrate the debtors' commitment to community and constitutional order. Return to article

¹⁸ See Mann, supra at 1. The Act of 1800 applied only to merchants, brokers, bankers, factors, underwriters and marine insurers who owed a minimum of $1,000 and who committed an act of bankruptcy. Although bankruptcy proceedings were—on their face—involuntary only, in practice many were collusive between debtor and friendly creditors. To receive a discharge, the debtor had to submit to at least three examinations by commissioners (two or more "good and substantial persons," who were politically connected lawyers and merchants) under oath and make full disclosure of all his property and recent transfers. The debtor could be released from jail during the examination period, which took 42 days. After the final examination, if 2/3 of the creditors—measured by the number of creditors and the value of their debts—were satisfied that the debtor had been forthright, they signed a document to that effect and submitted it to the commissioners, who would then sign a certificate and submit it to the judge for consideration of whether a discharge should be granted. Id., p. 223. Return to article

¹⁹ See Mann, supra at 251-52. Return to article

²⁰ It was not until the Act of 1841 that bankruptcy was available to all who applied, without regard to occupation. See Mann, supra at 258. Return to article

²¹ See Mann, supra at 260. Return to article