Though the U.S. Constitution granted it the power to create a bankruptcy law, Congress did not pass the first permanent bankruptcy law until 1898. Bankruptcies rose from about one per 10,000 people annually in the first decades of the twentieth century to about one per 300 people at the turn of the twenty-first century. Bankrupt in America explains how bankruptcy evolved from an option that Congress seldom used, to an indispensable tool for businesses, to a central element of the social safety net for households, all in the span of a century. The analytical narrative unites the history of how ... More

Though the U.S. Constitution granted it the power to create a bankruptcy law, Congress did not pass the first permanent bankruptcy law until 1898. Bankruptcies rose from about one per 10,000 people annually in the first decades of the twentieth century to about one per 300 people at the turn of the twenty-first century. Bankrupt in America explains how bankruptcy evolved from an option that Congress seldom used, to an indispensable tool for businesses, to a central element of the social safety net for households, all in the span of a century. The analytical narrative unites the history of how Americans have used bankruptcy with the history of the bankruptcy law itself. The central argument is that bankruptcy law and bankruptcy rates interact over time. Bankruptcy is the last in a series of choices by debtors and creditors about borrowing, lending, repaying, and collecting debt. Changes in federal bankruptcy law, in state and federal law governing debtor-creditor relations, in local legal culture, and in the supply of credit influence the choices and lead to changes in how the bankruptcy law is used. Changes in how the bankruptcy law is used give rise to changes in beliefs and in interest groups, which in turn result in changes in the law. The interactions create an ongoing historical process of institutional change. The book traces the interactions over the twentieth century using a rich combination of statistics and documents, including recently digitized bankruptcy statistics and stories constructed from court case files.