Reconstructing the Bankruptcy Power: An Originalist Approach

Abstract

This Note responds to two distinct difficulties in the constitutional law of bankruptcy. First, many bankruptcy scholars and practitioners intuit that the Thirteenth Amendment places important limitations on the law of personal bankruptcy, but this intuition is difficult to cash out in a convincing legal argument. Second, modern bankruptcy law requires an expansive construction of the bankruptcy power, but such a construction is difficult to ground in the meaning of the Bankruptcy Clause in 1789. This Note resolves both difficulties by showing how the proper legal construction of the bankruptcy power changed during Reconstruction with the ratification of the Thirteenth Amendment in 1865. Before Reconstruction, the bankruptcy power was limited to the creation of collective-creditor remedies against merchants who committed acts of insolvency. The Thirteenth Amendment both granted Congress new powers to legislate against relations of economic domination, including relations between creditors and insolvent debtors, and altered the function that the bankruptcy power plays within the Constitution. These changes amounted to a reconstruction of the bankruptcy power, such that bankruptcy law now has as its primary purpose the provision of a “fresh start” to the honest unfortunate debtor. This argument helps ground the constitutionality of both voluntary bankruptcy and corporate bankruptcy, but its most important implications are for consumer bankruptcy law, particularly the status of the debtor’s fresh start and the grounds on which it can be denied.

Keywords: originalism, interpretation, construction, Bankruptcy Clause, Contract Clause, Thirteenth Amendment, fresh start, due process