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Bankruptcy and Insolvency 1695-1878 L. Jefferson Davis, IV

Bankruptcy and Insolvency 1695-1878 L. Jefferson Davis, IV. Settlers “took refuge… from the frowns of fortune, and the rigors of creditors. Young men reduced to misery by folly and excess, embarked for the new settlement where they had leisure to reform….”

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Bankruptcy and Insolvency 1695-1878 L. Jefferson Davis, IV

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  1. Bankruptcy and Insolvency1695-1878L. Jefferson Davis, IV

  2. Settlers “took refuge… from the frowns of fortune, and the rigors of creditors. Young men reduced to misery by folly and excess, embarked for the new settlement where they had leisure to reform….” David Ramsay, M.D., History of South Carolina, From Its First Settlement in 1670 to the Year 1808, Vol. I, 76 (1858).

  3. The boarders were “neither clearly marked nor well understood, for they had never been settled by any public agreement between England and Spain.” David Ramsay, 1808.

  4. “We, the proprietors of Carolina, are utterly unable to afford our colony suitable assistance in this conjuncture; and, unless his majesty will graciously please to interpose, we can foresee nothing but the utter destruction of his majesty’s faithful subjects in those parts.”

  5. Bankruptcy Insolvency • Involuntary Voluntary (Operating at instance of the creditor) (Operating at instance of the imprisoned debtor) • Discharges the Contract Discharges the Debtor • Limited to Certain Classes Open to all Debtors of Debtors

  6. “The people of Carolina had been but a short time in the possession of peace and independence when they were brought under a new species of dependence. So universally were they in debt beyond their ability to pay, that ridged enforcement of the laws would have deprived them of their possession and their personal liberty…”

  7. “Congress shall have power … to establish uniform laws on the subject of Bankruptcies throughout the United States.”

  8. “The power of establishing uniform laws of bankruptcy is so intimately connected with the regulation of commerce, and will prevent so many frauds where the parties or their property may lie or be removed into different States, that the expediency of it seems not likely to be drawn into question.” Federalist No. 42

  9. 1800 Act ~ Involuntary ~Required debtor to commit a certain “act of bankruptcy” ~Limited to merchants and traders owing at least $1,000 ~Three meetings of creditors ~Creditors liquidated the assets ~Places of holding court were not always convenient for the debtor or creditors ~Discharge conditioned on the agreement of the creditors

  10. “There is… no bankruptcy law in this country but there are failures and insolvencies in abundance…. Insolvency… is unquestionably more common here than it is amoung an equal population in any part of England… It is however very seldom indeed that failures have occurred amoungst the long established and respectable merchants and traders of Charleston.” William Ogilby (1833)

  11. “I hold it clear, if by discharging the debt be meant releasing the obligation of a contract, either in whole or part, that neither this Government nor that of any of the States possesses such a power. The obligation of a contract belongs not to the civil or political code but the moral. It is imposed by an authority higher than human and can be discharged by no power under heaven, without the assent of him to whom the obligation is due.”

  12. 1841 Act ~Voluntary petitions ~All classes could file ~Limited reasons to deny a discharge ~Involuntary petitions limited to merchants and traders committing acts of bankruptcy ~Distance between the debtors and court still made filing inconvenient

  13. 1867 Act ~ Voluntary petitions for all classes of citizens owning at least $300 ~Blend of federal and state exemption laws ~ Compositions allowed in 1874 ~Court required to be open at all times and allowed to hold session at any place within the judicial district ~Varying discharge amendments eventually requiring creditor consent for debts contracted after 1869

  14. Bankruptcy and Insolvency1695-1878L. Jefferson Davis, IV

  15. Introduction to Bankruptcy Practice in South Carolina Hon. John E. Waites U.S. Bankruptcy Judge District of South Carolina

  16. The U.S. Bankruptcy Court for the District of South Carolina • Division of the U.S. District Court • Order of Reference • Separate courthouse, clerk’s office & records • CM/ECF • Appeals to District Court – report & recommendations

  17. Basic Concepts • Uniform Federal Law – Title 11 of the U.S. Code • Code balances interests of debtor and creditors & types of creditors • Provides for automatic stay • Identifies property of the estate and procedures for paying prepetition claims • Collective Process – consolidates all claims in one court local to the debtor

  18. Automatic Stay11 U.S.C. § 362 • Injunction against further collection efforts • Provides breathing spell • Actions in violation of stay are void • Willful violation of stay is actionable

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