Article 1, Section 8, Clause 4 (Bankruptcy)

Document 3

St. George Tucker, Blackstone's Commentaries 1:App. 259--60

There are few subjects upon which there is less practical information to be obtained in Virginia, than that of bankruptcies. The English statutes of Bankruptcy have never been regarded as in force, here; and the manner in which the commerce of the colony was conducted, before the revolution, by no means seemed to favour their adoption. In a commercial country, such as England, the necessity of good faith in contracts, and the support of commerce, oblige the legislature to secure for the creditors the persons of bankrupts. It is, however, necessary to distinguish between the fraudulent and the honest bankrupt: the one should be treated with rigor; but the bankrupt, who, after a strict examination, has proved before proper judges, that either the fraud, or losses of others, or misfortunes unavoidable by human prudence, have stripped him of his substance, ought to receive a very different treatment. Let his whole property be taken from him, for the benefit of his creditors; let his debt, if you will, not be considered as cancelled, till the payment of the whole; let him be refused the liberty of leaving his country without leave of his creditors, or of carrying into another nation that industry, which, under a penalty, he should be obliged to employ for their benefit; but what pretence can justify the depriving an innocent, though unfortunate man, of his liberty, as is said to be the practice in some parts of Europe, in order to extort from him the discovery of his fraudulent transactions, after having failed of such a discovery, upon the most rigorous examination of his conduct and affairs!

But, how necessary soever, bankrupt laws may be in great commercial countries, the introduction of them into such as are supported chiefly by agriculture, seems to be an experiment which should be made with great caution. Among merchants and other traders, with whom credit is often a substitute for a capital, and whose only actual property is the gain, which they make by their credit, out of the property of others, a want of punctuality in their contracts, may well be admitted as a ground to suspect fraud, or insolvency. But the farmer has generally a visible capital, the whole of which he can never employ, at the same time, in a productive manner. His want of punctuality may arise from bad crops, unfavourable seasons, low markets, and other causes, which however they may embarrass, endanger not his solvency; his property is incapable of removal, or of that concealment, which fraudulent traders may practise with success; his transactions within the proper line of his occupation are few, and not liable to intricacy; whilst the merchant is perhaps engaged in a dozen different copartnerships, in which his name does not appear, and in speculations which it might require a [Volume 2, Page 622] life to unravel. To expose both to the same rigorous, and summary mode of procedure, would be utterly inconsistent with those maxims of policy, which limit laws to their proper objects, only. And accordingly, we find, that even in England, where the interests of commerce are consulted on all occasions, and where they are never sacrificed, (unless, perhaps, to ambition,) the bankrupt laws cannot affect a farmer, who confines himself to the proper sphere of his occupation; and the bankrupt law of the United States, 6 congress, 1 session, c. 19, is confined to merchants, or other persons, actually using the trade of merchandise, by buying and selling in gross, or by retail, or dealing in exchange as a banker, broker, factor, underwriter, or marine insurer. Whilst the bankrupt laws are confined to such characters, and are resorted to, merely as a necessary regulation of commerce, their effect, in preventing frauds, especially where the parties or their property may lie, or be removed into different states, will probably be so salutary, that the expediency of this branch of the powers of congress, will cease to be drawn in question.

The Founders' Constitution
Volume 2, Article 1, Section 8, Clause 4 (Bankruptcy), Document 3
http://press-pubs.uchicago.edu/founders/documents/a1_8_4_bankruptcys3.html
The University of Chicago Press

Tucker, St. George. Blackstone's Commentaries: With Notes of Reference to the Constitution and Laws of the Federal Government of the United States and of the Commonwealth of Virginia. 5 vols. Philadelphia, 1803. Reprint. South Hackensack, N.J.: Rothman Reprints, 1969.