The Last Bankrupt Hanged: Balancing Incentives in the Development of Bankruptcy Law

This Article frames the history of the Anglo-American bankruptcy tradition as a search for solutions to the basic problem that has from the first underlain the bankruptcy process: how to obtain the assistance of a debtor in his financial dismantling. The pivotal moment in this story came in the years 1705 and 1706, when the English Parliament drafted a bill making the bankrupt's refusal to cooperate with the commissioners running his bankruptcy a capital crime. Almost as an afterthought, they also introduced discharge of debt. Incentivizing cooperation with discharge would have a fruitful future.

Coercing the debtor to be honest, however, proved a failure. Fraud flourished, and few perpetrators were executed, in part because creditors and jurors found putting bankrupts to death a bit excessive. And yet, despite the failure of the English experiment with harsh penalties, the desire to punish debtors has remained a part of the culture of bankruptcy to this day.