This Note responds to two distinct diﬃculties in the constitutional law of bankruptcy. First, many bankruptcy scholars and practitioners intuit that the Thirteenth Amendment places important limitations on the law of personal bankruptcy, but this intuition is diﬃcult to cash out in a convincing legal argument. Second, modern bankruptcy law requires an expansive construction of the bankruptcy power, but such a construction is diﬃcult to ground in the meaning of the Bankruptcy Clause in 1789. This Note resolves both diﬃculties by showing how the proper legal construction of the bankruptcy power changed during Reconstruction with the ratification of the Thirteenth Amendment in 1865. Before Reconstruction, the bankruptcy power was limited to the creation of collective-creditor remedies against merchants who committed acts of insolvency. The Thirteenth Amendment both granted Congress new powers to legislate against relations of economic domination, including relations between creditors and insolvent debtors, and altered the function that the bankruptcy power plays within the Constitution. These changes amounted to a reconstruction of the bankruptcy power, such that bankruptcy law now has as its primary purpose the provision of a “fresh start” to the honest unfortunate debtor. This argument helps ground the constitutionality of both voluntary bankruptcy and corporate bankruptcy, but its most important implications are for consumer bankruptcy law, particularly the status of the debtor’s fresh start and the grounds on which it can be denied.
An obvious missed opportunity would have been to include Abraham Lincoln's quote from the Gettysburg Address, which together with his Second Inaugural Address are foundational to the new understanding of the entire Constitution that followed his death in the Reconstruction Amendments, by noting that the bankruptcy clause as reconstructed by the 13th Amendment provided that debtors too would "have a new birth of freedom."
The discussion in this article of how the term "uniform" in the Bankruptcy Clause relates to the parallel term in the naturalization powers granted to the federal government is very pertinent to the case of Siegel v. Fitzgerald, which is currently pending in the Supreme Court, and concerns whether the two systems of bankruptcy oversight, the Bankruptcy Administrators in North Carolina and Alabama and the U.S. Trustee Program in the rest of the country, are uniform. As discussed by James Madison in the Federalist No. 42, the uniformity in the naturalization power was meant to prevent the "very serious embarrassment" of states racing to the bottom in easing immigration. Similarly, the uniformity requirement in the bankruptcy clause should be seen as a tacit and tactful rebuke to the forum shopping between states in regards to debt relief. The uniformity was meant less to apply to federal choices regarding bankruptcy.
Further, this article makes clear that advocates for student loan debt relief, rather than grounding their arguments on the Bankruptcy Clause, which was originally meant as a right creditors had to force debtors into bankruptcy, would be on firmer ground viewing the Bankruptcy Clause as reconstructed through the lens of the 13th Amendment prohibition on "involuntary servitude." Then the question becomes whether a student loan repayment scheme, such as an Income Driven Repayment plan, is so coercive that it becomes "involuntary servitude." That coercion becomes clear when the debtor is insolvent and cannot repay. While IDRs do not generally consider a debtor's assets, the lack of both those and any ability to meaningfully repay the student loans could be seen as unconstitutional involuntary servitude. The article does in fact argue that the "undue hardship" standard for allowing discharge of student loans fails this and is "in a constitutional sense, not ... bankruptcy at all."
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