The Last Bankrupt Hanged: Balancing Incentives in the Development of Bankruptcy Law
91 Pages Posted: 13 Aug 2009 Last revised: 19 Jul 2010
Date Written: August 10, 2009
This paper frames the history of the Anglo-American bankruptcy tradition as a search for solutions to the basic problem that has from the first underlain the bankruptcy process: how to obtain the assistance of the debtor in his financial dismantling. The pivotal moment in this story came in the years 1705-1706, when the English Parliament drafted a bill making the bankrupt’s refusal to cooperate with the commissioners running his bankruptcy a capital crime. Almost as an afterthought, they also introduced discharge of debt. Incentivizing cooperation with discharge, of course, would have a fruitful future. Coercing the debtor to be honest, however, proved a failure. Fraud flourished, and few perpetrators were executed, in part because creditors and jurors found putting bankrupts to death a bit excessive. And yet, despite the failure of the English experiment with harsh penalties, the desire to punish debtors has remained a part of the culture of bankruptcy to this day.
Keywords: capital punishment, bankruptcy, legal history
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