An Emphasis on Workout rather than Liquidation
An Emphasis on Workout rather than Liquidation
As bankruptcy rates increased in the 1920s, creditors and legal professionals sought to increase in the efficiency of administration. However, as the nation slipped into the Great Depression, reformers found that neither the country nor Congress was interested in their ideas for improving efficiency. Business bankruptcy increased rapidly at the start of the Depression, and President Hoover pushed Congress to add ways for businesses and farmers to develop repayment plans and avoid liquidation. As the Depression wore on, however, business bankruptcy became less of a problem because new business formation was low. Personal bankruptcy cases continued to increase in states with pro-creditor collection law. Representatives from those states, especially Walter Chandler from Tennessee, argued that workers wanted to pay their creditors if they, too, could have a procedure that granted them more time. Congressional debates around the proposals that eventually became Chapter XIII (now known as Chapter 13) pitted those who viewed the procedure as a means to enable people to pay their debts and avoid the stigma of bankruptcy against those who balked at the idea of making the courts a collection agency for creditors. This theme was reprised several times over the next 70 years.
Keywords: Chapter XIII, Great Depression, stigma, workout, Herbert Hoover, Walter Chandler
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