Near East, Biblical and Athenian Precedent For the U.S. Constitution’s Bankruptcy Provisions

Debt is an eternal problem. Bankruptcy law grappled with economic problems, like drought and war, frequently beyond the control of its victim. Debt cancellation, or Bankruptcy, finds clear precedent in Near Eastern kingdoms, Leviticus and Deuteronomy, and Solon’s Greece.

     Leviticus 25:8-55 and Deuteronomy 15:2-3 establish the sabbatical year, “Every seventh year you shall practice remission of debts. This shall be the nature of remission; every creditor shall remit the due that he claims from his neighbor; he shall not dun his neighbor nor is kinsman, for the remission proclaimed of the Lord. You may dun the foreigner; but you must remit whatever is due you from your kinsman.” This rule inhibited creditors providing capital to farmers and merchants. Hillel introduced the Greek term Prosbul, meaning “Before the assembly of counselors.” This declaration made in court, before the loan’s execution, waived the legal release of debts upon the entrance of the sabbatical year, is akin to a Uniform Commercial Code exception.

     In 594-3 B.C.E., Solon, an Athenian archon and “arbiter” with legislative powers, according to Aristotle and Plutarch, noting the frightful disparity of fortune between rich and poor (income inequality) had resulted in the loss of freedom through wage slavery, cancelled debt.

     The founding fathers knew the Old Testament and Solon. The Puritans were steeped in scripture. Greek history informed the educated.

     The Declaration of Independence writers viewed with alarm, English bankruptcy legislation, debtor’s prison, penal transportation to the colonies for debt, and indentures in return for seven years labor. But the Articles of Confederation were silent on the subject of bankruptcy.

     In 1786, debtors spurred by depression fomented Shays Rebellion threatening the young republic. The Constitutional Convention met in Philadelphia in May, 1787. The resulting document enhanced federal power and authority. As the “necessary and proper clause” took shape, it included central powers for laying and collecting taxes, duties imposts and excises, regulating commerce, making war and raising armies, but not bankruptcy. On September 17, 1786 the Committee of Style produced Article I, Section 8, of the Constitution — “The Congress shall have power to …establish a Uniform Rule of Naturalization, and uniform laws on the subject of Bankruptcies throughout the United States.”

     Disparate societies and leaders displayed values tackling the recurrent and chronic problem of debt. Human talents, endowments, opportunities, and natural, social and political circumstance result in a divergence of interests between rich and poor, rural and urban, between farmers, merchants, lenders, borrowers and consumers, common folk and political elites.

     The causes of personal bankruptcy often include health issues, unemployment, divorce and financial catastrophes which, unlike abusive use of consumer credit, evoke sympathy rather than blame. The penalty for economic misfortune or improvidence can be punitive or benign, insuring or forgiving. Thus, the Constitution draftsmen and latter-day legislators have followed the fresh start rather than the shackles and have adopted the Biblical and Athenian spirit of forgiveness.

    © Oliver B. Pollak 2014

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