Monday, July 25, 2005

Bankruptcy Power -- Maybe Not What You Thought

Todd Zywicki on the bankruptcy power of Congress:
". . . the Bankruptcy power in Article I, sec. 8 of the Constitution was not actually put into the Constitution to help debtors. This is usually quite surprising to most people. It was actually put there in large part to help creditors--like the Contracts clause, Fair Faith and Credit, and prohibition on state issuance of paper money, Congress's power to 'enact uniform laws on the subject of bankruptcies' was designed to enable creditors to collect interstate debts more easily and to eliminate the power of state legislatures to try to discharge the debts of their residents (as often was the case during the Articles of Confederation era). In particular, states used their laws to pass pro-farmer laws that interfered with the ability of banks to collect on farm loans and vesting the Bankruptcy power in the federal government was an effort to restrict the excesses of state legislatures under the Articles."

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