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The history of bankruptcy in America: The Chandler Act

Written by Wesley Scott | August 13, 2022 at 12:30 PM

Carrying on from our discussion putting past bankruptcy policies in context, we arrive at the 20th century and the development of our modern bankruptcy regime. The Bankruptcy Act of 1898 was never repealed, lasting until the enactment of the Bankruptcy Act of 1938.  The Chandler Act, as it became known, was not revolutionary. It simply increased access to debtors and made voluntary bankruptcy more attractive for debtors. Technically, the Chandler Act merely amended the previous policy, so an incremental change to bankruptcy policy is not surprising. It is worth noting that modern case law occasionally looks back to these 20th century policies for precedential decisions. 

The Chandler Act came in response to the great depression. Around this time, the idea emerged that debt-laden consumers are less productive members of society, because those individuals do not see the full fruits of their labor. Even more importantly, policy makers realized that entrepreneurs would be stifled if the debt they incurred starting and running a business could negatively affect them for the rest of their lives. 

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While not the most robust discussion topic, the Chandler Act helped bring bankruptcy policy “into the 20th century.” 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.