Repeal of the Bankrupt Law.
The House resolved itself into a Committee of the Whole, on the resolution, offered by Mr. Newton, for repealing the Bankrupt law.
The resolution was advocated by Messrs. Newton, Elliot, Smilie, Hastings, Stanford, and Randolph; and opposed by Messrs. Jackson, Early, Skinner, and Eustis.
The advocates of repeal observed that though the resolution had lain on the table for a considerable time, purposely with a view to collect public opinion, no remonstrance hostile to it had been received from any part of the Union, and that this circumstance indicated the unfavorable sentiment entertained of the bankrupt system; and that even among those most materially interested in its provisions, a dead silence prevailed. Some gentlemen were averse to the repeal, inasmuch as the law would expire by its own limitation, in a few years; but the House should recollect that in the mean time they were responsible for all its evils and iniquities. If, too, it should be suffered to die a natural death, the inevitable effect would be that those who are now struggling to avoid bankruptcy will precipitate themselves into such a situation as to avail themselves of its benefit.
With regard to the principle of the present bankrupt system, and probably of any other bankrupt system that could be devised, it was unjust, inasmuch as it favored one class of citizens, the merchants, at the expense of all other classes; to advance the interest of the first it sacrificed the interests of all the other members of the community. To prove this, it was only necessary to illustrate it by the common case of a merchant availing himself of the benefits of bankruptcy, and thereby cancelling the demands of the mechanic or the farmer who might be his creditor; and of the same individual mechanic or farmer, the debtors of another merchant, remaining his debtor with their property subject at any period of their life to his seizure. In the case of the insolvent merchant his debts were totally discharged; whereas in the case of the insolvent mechanic and farmer, they were of eternal obligation. The preferable system was that established by the several States, which existed before the bankrupt system, and which still existed, extending to all insolvent debtors the same relief.
It was contended that the partial operation of the bankrupt system had the most mischievous influence on the morals of the mercantile world. That it operated as an impunity to fraud and negligence; that it created extensive credits, and excited a spirit of the most prodigal expenditure; that although the American merchants were probably the most honest and certainly the most able and enterprising in the world, the facility with which credits were obtained, and the impunity with which risks were incurred, had, under the auspices of this law, introduced into their private expenditures a ruinous extravagance; and that nothing was more common than to see a merchant, of but small capital, living at an expense superior to that of the European trader who had realized his plum, and at an expense which shamed the frugal disbursements of the affluent planter. What were the effects? The scene of luxury and splendor was enjoyed for a few years, and was succeeded by a failure. Did it become the Legislature to encourage, or repress this spirit?
The principle of the bankrupt system was inequitable as it regarded the relation of debtor and creditor. However it might be averred to the contrary, it was a truth that its provisions operated to the advantage of the debtor, and of course to the detriment of the creditor. There was no weight in the remark that the commission was taken out at the instance of the creditor, as that was merely a nominal act, a creditor usually being made use of who was the friend of the bankrupt. That it operated to the benefit of the debtor was clear from its liberating all his future acquisitions, after availing himself of the benefit of a commission, from seizure: whereas, under an insolvent law, the person alone was released. That hence sprang up a ten-fold temptation to fraud under this act, over that which existed under the common insolvent laws. For that under the latter an insolvent debtor, if guilty of a fraudulent concealment of property, could at any future period be called upon to satisfy the claims of his creditors by a delivery of his visible property; while, under this law, the bankrupt may live in the greatest splendor, even ostentatiously displaying his property, without rendering it liable to seizure. Fraud once successfully perpetrated and concealed, every restraint is removed; and so deleterious had this effect been that it had manifestly inflicted a deep wound upon the confidence of man with man in the ordinary transactions of life.
It was further contended, that while justice and humanity dictated the liberation from arrest of the body of the unfortunate debtor, justice inhibited the exoneration of property from going to satisfy just debts; that the obligation, wherever the ability existed, to pay just debts, was eternal, and that this law, in having a retro-active effect, was unjust. Evils infinitely greater had been inflicted by inconsiderate and fraudulent debtors taking refuge in the provisions of the bankrupt law than from all the inhumanity exercised by merciless creditors over unfortunate debtors. That the principle of the bankrupt law was also retro-active, inasmuch as it destroyed the grade of dignity existing in many of the States, by which a bonded debt obtained a preference over an open account; that it absolutely impaired the subsisting contract between the person holding and the person signing the bond.
It was remarked that the principle of the bankrupt law, however good in theory, could never be carried into effect, as had been proved by a long course of British experience, without a recurrence to those sanguinary laws which they had introduced for the prevention and punishment of fraud, but which were so abhorrent to our code of laws that public opinion could not tolerate them.
The expenses of going through the forms of bankruptcy constituted no inconsiderable objection to the system. The appointment of a Commissioner was understood to be in no small degree lucrative, and the various processes through which the bankrupt was compelled to go, in practice, reduced the little property he had left to a state still less. Indeed, from the practical effects of the system, it would appear that it had been made more for the emolument of the Commissioner than for the benefit of the creditor.[7]