Available at: Available at SSRN: https://ssrn.com/abstract=5253527 or http://dx.doi.org/10.2139/ssrn.5253527
Abstract:
This paper is the first archival researched history of the genesis of municipal bankruptcy law. It also contrasts the historical method with law and economics as methodology for finding and telling this story. Congressman Hatton W. Sumners, Chair of the Judiciary Committee of the House of Representatives was the key actor, and the legislative process operated as a sort of laboratory for new and more powerful forms of relief for municipal insolvency during the Great Depression under the Bankruptcy Clause. The history has applications today, even in mass tort Chapter 11 cases.
Commentary:
Obviously, a history of municipal bankruptcy law does not not bear heavily on the two focal points of this blog, primarily consumer bankruptcy but also North Carolina. (As N.C.G.S. § 23-48 seems to place rather serious procedural restrictions on Chapter 9 filings here.) That aside, this is an incredibly detailed history of the origins of Chapter 9 and a long- needed supplement to other histories of bankruptcy.
Additionally, consumer bankruptcy, like municipal bankruptcy, often aims to preserve dignity through a fresh start and essential functions (e.g., housing, income, healthcare) rather than merely maximize creditor returns as Law & Economics scholars tend to fixate. Daniel’s work underscores that bankruptcy should not be viewed solely through the lens of maximizing recoveries for creditors, but rather as a policy tool to balance competing interests and restore individual or institutional viability.
Lastly, Daniels recognizes that Hatton W. Sumners, the legislative architect of Chapter IX , explicitly supported white supremacy. Even if that racism was not explicitly codified into the statute, it certainly shaped the boundaries of who municipal bankruptcy was designed to serve and protect. The law's emphasis on preserving “local governance” and “sovereignty” have long been dog-whistles that must be read in light of this commitment to maintaining racial hierarchies.
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