In the last two posts we discussed the Bankruptcy Act of 1800 and the Bankruptcy Act of 1841 respectively so we, perhaps unsurprisingly, now turn to the next policy: the Bankruptcy Act of 1867. It is worth noting that this policy and the previous two were all responses to poor economic conditions and were unintentionally temporary. In the wake of the 1857 financial crisis and the Civil War, debtors and creditors alike were in need of options for remedy. This new incarnation signaled a change in reasoning in bankruptcy policy which was slightly more beneficial to debtors.
Several changes to the policy signaled increasing concern for debtors. First, provisions for reorganization were promulgated, then called by the misnomer “composition” (recomposition seems more appropriate to me). The new act also allowed debtors to choose between federal and state exemptions, which helped debtors protect as many assets as possible. It also allowed for smaller dividends to creditors, though many criticized this aspect.
Some provisions were not favorable to debtors – namely the exceptions to discharge which prevented two thirds of debtors from receiving one. Furthermore, administration of the cases was slow and expensive.
Eleven years after it was instituted, the Bankruptcy Act of 1867 was repealed. Though idealistically progressive in many ways, there were too many unsuccessful provisions for this policy to last. Next post, we will discuss the subsequent bankruptcy regime passed in 1867.
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If you are interested in the history and philosophy of the economy, bankruptcy, and debt, stay tuned for my blog posts. And, if you are thinking about filing, reach out to us at www.lifebacklaw.com.
