All your resources at your fingertips.Learn More
In the June issue of the American magazine The Atlantic Monthly, there was a fascinating article by Megan McArdle about the American society's frequent desire to punish bankrupts. I just spent a few months writing a paper on capital punishment for fraudulent bankruptcy in England pre-1820, and the continuity between the angry demands of 16th, 17th, 18th, and 19th-century English parliamentaries and writers on debt that bankrupts should be punished with the same angry demands by the American senators debating the 2005 bankruptcy code amendments is stunning, especially given how radically the bankruptcy laws have changed in those centuries. There are, of course, a few problems with such calls for vengeance. For one thing, as the English discovered during the 108-year period when fraudulent bankruptcy was a capital offense, dead bankrupts don't pay back their debts. And punishing bankruptcy is not like punishing murder, with which bankruptcy was for several centuries actually equated, because retribution should have no role to play. Furthermore, as McArdle points out, punishing debtors is not economically efficient. Yet, for centuries, creditors were willing to put aside their economic self interest in order to imprison, hang, and otherwise see their debtors suffer. We might think that we have gotten beyond that stage now that we have generous bankruptcy systems that give the debtor so many advantages in order to try to help him get back on his feet.
But something about the idea of a person borrowing money and being able to get away with not paying it back still stirs up rather primal emotions, much as violent crime does.
"This is the ultimate statement of where the law on IVAs is to be found in our great common law...