A Trifling Debt Makes a Man Your Debtor; a Large one Makes Him Your Enemy

"A trifling debt makes a man your debtor; a large one makes him your enemy."

Seneca

I. Teacher to Teacher Dialogue

The bankruptcy material presents an excellent opportunity to illustrate how law works as the end product of social philosophies and value judgments. The best place to start is with the "pre-enlightened" era of debtor's prisons and the like. History shows us that earlier societies in Western Europe held debtors not only in low regard but sought to criminally punish those who could not repay their obligations. These views eventually gave way to the more liberal view that allows for a fresh start after proper procedures for debt discharge are used.

Debtor's prisons were holding cells for economic hostages whose ability to get out was directly proportional to the debtor's ability to get others to pay his debt for him. Many of those dungeons became so crowded that the New World became a dumping ground for detainees. As fate would have it, that migration was most fortuitous for our nation. Very often the same people who were in prison for debt were also the innovators, risk takers, and entrepreneurs who helped build a new economic system less encumbered by class mentalities.

The basic underlying premise of bankruptcy law is founded on a simple reality: bad things happen to good people. How many of us can really provide ourselves with a safe haven from financial disasters brought on by bad health, economic downturns, financial institution failures, and the like? The early bankruptcy laws of England first recognized that businesses can and do fail in spite of the best good faith efforts of their proprietors. That failure should not, in effect, act as a life sentence in keeping that business or its proprietor from reentering the marketplace. Bankruptcy is really one of the earliest forms of recycling, a recycling of economic opportunity for good faith debtors who deserve a second chance.

As with any legal favor, there are people and business entities that get too greedy when asking for the benefit of the law. Bankruptcy is built on a cornerstone of good faith. Where debtors' actions are motivated by bad faith attempts to avoid legitimate obligations, both the law and the larger societal public policy is subverted. The history of the law of bankruptcy is riddled with cases of clear abuse and creditor victimization that have created a dilemma for legislators who must draft bankruptcy statutes.

The recent history of federal reforms in the United States illustrates Congress's attempts to deal with the dilemma of trying to make the law more humane while trying to curb abuses. The Bankruptcy Act of 1978 provided for sweeping reforms that sought to destigmatize bankruptcy in an economy that had grown too dependent on credit. Unfortunately,