An Olde Argument For Bankruptcy Laws (From 1755): A Lesson For Today

History: From Colonial Times (Photo by Marilyn Swanson)

By: Donald L Swanson

Bankruptcy issues have been around for a very long time—for centuries, in fact.

And bankruptcy issues have been discussed in these United States for the entire time of our existence–and before.

Even in our Colonial times (prior to 1776), bankruptcy and insolvency issues were in much discussion—especially since debtors often found themselves imprisoned, back then, for unpaid debt.

What follows is a letter (in condensed form) written in 1755 (that’s more than twenty years prior to the Declaration of Independence) arguing for the creation of bankruptcy laws to address problems of debt and insolvency, including the imprisonment remedy. [Fn. 1]

Such letter and its arguments provide a fascinating insight into bankruptcy issues of olde—which are instructive for the bankruptcy issues of our present day.



I was really surprized, when you desired my Opinion concerning the Law of Bankruptcy, as to the Expediency or Non-Expediency for the Relief of insolvent Debtors.

Reasons for such an Act in England hold good in America: Debtors and Creditors being much the same in both places.  I have long thought a Bankruptcy Act the proper Object of our Legislature’s Attention to be of publick Service for four reasons:

  • FIRST, As beneficial to the Publick,
  • SECONDLY, Serviceable in general to the Debtor.
  • THIRDLY, In general, no Disservice to the Creditor.
  • FOURTHLY, Agreeable to Reason, and the Genius of our holy Religion.

First, An Act of Bankruptcy may be beneficial to the Publick.

–Preventing Loss of Money

A Bankruptcy Act would save a good deal of Expence, and prevent many ill Consequences. Let us view an insolvent Debtor, prosecuted and imprisoned (under that terrible Sentence, Thou shalt not come out thence till thou hast paid the utmost Farthing). Is this Man ever likely to discharge the Debt? No; that Place is not a Place for Improvement but Punishment.  The Consequence is this: if the Man has 1000l. of his Creditor’s Estate, he will consume it in such a Manner that neither his Creditor or the Publick will be benefitted. Such Losses are impoverishing to the Publick, which will lose the Benefit of the Man’s Labour during the Time of his Confinement, and that of his Family.  And what would such losses, if they be multiplied, prove to the Publick!

The Loss is yet more considerable, should this Man, (thus imprisoned) being an honest Man, (which may be the Case) be a Man of Skill and Experience in Merchandize, who, by the Badness of the Times in Trade, or by the mere Providence of GOD, has been reduced. Or should he be a Man of known Ingenuity, either in Literature or in any of the mechanical Arts, which are beneficial to Mankind; as Prison is no Place for the Improvement of a Man’s Skill, &c.

–Preventing Loss of Services

This Man (after having been fatigued, plagued and disgraced with a four or five Years Imprisonment) is never like any more to be of any great Service to himself or any Body else, because he will:

  • look upon the Imprisonment (often justly) as a Piece of Revenge and Ill-nature, and done rather in Compliance to the malicious Temper of a haughty Creditor;
  • have no Sense of Honour or Ambition, or be depressed in his Spirits, and out of Humour with Mankind; and
  • have contracted so strong a Habit of Idleness, tho’ he should be so happy as to escape that of Intemperance in Drink, and maintain a good Constitution, which few under those Circumstances do.

These are some of the Evils a Bankruptcy Act would prevent. Moreover, as a Prison so much resembles the final Punishment of Wickedness, the unhappy Man that is doomed to that Place, is not only become a Bankrupt as to his Fortune, but as to his Faith and Honour.

–Preventing Desperate Acts

The man’s Apprehensions of the Consequences of a Failure, when his Fortune is declining and sinking, cause him, in order to save himself, to pursue such Measures that bankrupts both his Faith and Fortune.  Whereas, we believe that a Man might be a Bankrupt, and yet be a Man of Honour and Fidelity: a Man in declining Circumstances, of a common Degree of Honesty, would ordinarily act quite differently when Bankruptcy relief is available (with more Vertue, more healthful to the Publick, less detrimental to his Creditors, and by far safer and more honourable for himself).

It might be beneficial and productive of much Good. In England, there are Thousands of Gentlemen who have proved Bankrupts, and have:

  • delivered up their Effects to their proper Owners and began the World anew;
  • become Men of distinguished Characters in the mercantile Life; and
  • by Skill and Application to Business, have procured vast Fortunes.

This is a publick Good: But could never have occurred under the unhappy Circumstances that our Debtors are in—without a bankrupt law.

–Preventing Being Branded as Villains

Insolvent Men are commonly branded as Villains and judged unworthy to be entrusted with any of the Concerns of this Life.  Some Villains I grant there are; but then I would observe, that there are a great many Men of Probity and Honour who not being sufficiently instructed in the Nature of Trade, have over-traded their Stock; which has been the Cause of their Ruin.  These unfortunate Gentlemen have purchased their Skill at a dear Rate; but are now possibly qualified for the Business, which heretofore they were not capable of managing; if so, why should the Publick be deprived of the Service, which by Experience (dear to themselves) they are now capable and willing to render? Moreover, some Men are render’d insolvent by the mere Providence of God.  Should these Men be deemed as Villains, because they are subject to a Fate that is unavoidable? Shall these unhappy Men be denied the Privilege and Pleasure of breathing the common Air, to which the Birds and Beasts are welcome? And because God disciplines, shall Men punish?

–Preventing Imprisonment

But suppose the Worst, a Man is render’d insolvent by his own wicked Conduct; I ask, will it serve any good Purposes in the State, to commit these Men to Prison? Will the Publick be benefitted by it—or their Creditors, or they themselves? I believe not.  Shall they be committed as Sinners? No certainly! as such they are accountable to the highest Tribunal, and to that only. We may be thought to be tolerable good Judges as to Property; but as to Virtue and Vice, we are insufficient Judges—only He who knows all Things is a proper Judge.

Suppose an insolvent Man owes large Sums of Money and has Nothing to discharge them with.  If he is put into Prison, (i) there is no Opportunity or Motive for Industry; (ii) his Thoughts and Concern there are to no Purpose; and (iii) if after a long Confinement, he should obtain Prison-Delivery by taking the Poor-Man’s Oath, his Spirits are so sunk with the Weight of his Debts, that he has no Heart to work for his Relief.  In Consequence, he will do Nothing to Purpose.  He imagines that he is Nothing but a Slave to his Creditors; that he is likely never to possess any Thing for himself or Family, and so the remaining Part of Life is lost to himself, to his Creditors, and to the Publick. 

I never knew an Instance, of any Man under these Circumstances, ever making any Thing for himself, or any Body else.  But if he take Benefit by the Act of Bankruptcy, and deliver up his Effects to his Creditors, and begin the World anew, he might be encouraged to Frugality and Industry, and do every Thing in his Power to make an Interest for himself, as every Thing that he should then acquire would be his own.

–Debunking an Objection

Some object that the Government cannot, in Equity, discharge a Debt due from a Debtor to a Creditor, without the Consent of the Creditor.

To this Objection I answer, (i) since we hold our Estates under the Government, who defends and protects it, the Government has an equitable Right to inspect our Trade and Commerce one with another, and determine under all Circumstances, when a Man shall be holden, and when discharged, and (ii) a Government is to be considered as one great Family, and that our Estates are properly to be considered as so many Parts of the Common-Stock; which we are allowed to improve for our own Benefit, but in such a Form as not to be detrimental to the Government.  Consequently any Contracts we make, if they should be judged prejudicial to the common Interest, may be made void, and of none Effect.

SECONDLY, an Act of Bankruptcy would be serviceable to Debtors.

An Act of Bankruptcy would be a Service to Debtors, by giving them an new beginning in the World and making an Interest for themselves and the Publick.  This creates a strong Motive to industriously improve themselves.  It also delivers them from Prison—and the innumerable Evils that attend it.

A Bankruptcy Act would deliver Debtors from the Malice and Revenge of their Creditors. Troubles that attend a Failure, are almost infinite, and should excite our Pity: Why then should the Publick abandon such an unhappy Man to the Fury and Resentment of incensed Creditors?

The Lamentations of a fallen Familiar and Intimate (frequently heighten’d by the Tears of a tender Wife, and affecting Cries of their innocent Babes) should excite Compassion; but Mankind are grown so degenerate, as to become insensible to the Distresses of others, much less to defend them from, or administer Relief under them.  The unfortunate Debtor is now shunn’d, and the best Usage he finds is Slights from almost every Individual; whilst the worst is Insults offered him, Contumenies and Reproaches thrown out against him, with Abuses, Invectives and unmerited Aspersions frequently added.  Few regard him, fewer still caress him, and the Paucity of those who protect or assist him, are reduced to the lowest Degree of Comparison.

A Bankruptcy Act would be a Kindness to a Debtor, and for that Reason he ought to have the Benefit of it.

THIRDLY, ’tis no Disservice to Creditors in general.

How frequently do we observe insolvent Debtors spend their Creditor’s Estates in Prison, often large Sums.  Then, after a Length of Time are supported at the Expence of the Creditors until the Creditors tire of it.  And finally obtain Prison-Delivery, upon taking the Poor-Man’s Oath—at which time, the Creditors, having suffered the Loss of large Sums (which might be saved by a Bankruptcy Act):

  • are found to be farther Removed from their just Dues than ever; and
  • complain that all their Fatigue and Costs are to no Purpose.

Indeed, the Law of Bankruptcy in general is rather a Favour than a Prejudice even to the Creditor himself.

FOURTHLY, A Bankruptcy Act is consistent with Reason, and agreeable to the Genius of our holy Religion.


Reason considers all Trade properly as a Barter: an Exchange of one Article for another.  Reason understands this.  Reason supposes that whenever a Contract is made, and one Thing is given, or secured to be given, in Exchange for another, that the Thing so given, or secured to be given, is an Equivalent to the Thing received.  So our Courts of Justice understand it.

When a Creditor has received all the Debtor’s Estate, be that an Equivalent to his Demand or not, Reason says, he has no Demand on the Debtor’s Person; that being a Thing that was never understood to be a Commodity in Trade. The Law of Bankruptcy is to be built upon this Foundation, viz. that a Creditor’s Demand lies against the Estate, and not against the Person, of the Debtor.


Such an Act is agreeable to the Genius of our holy Religion, including a benevolent, compassionate and forgiving Temper:

  • If there be among you a poor Man of one of thy Brethren, &c. thou shalt not harden thine Heart, nor shut thy Hand from thy poor Brother; but thou shalt open thine Hand wide unto him, and shalt surely lend him sufficient for his Need, in that which he wanteth;
  • If thy Brother be waxen poor, &c. then thou shalt relieve him, &c. that he may live;
  • If, says JOB, I have seen any perish for Want of Cloathing, or any Poor without Covering; if his Loins have not blessed me, &c. then let mine Arm fall from my Shoulder-blade, and mine Arm be broken from the Bone;
  • Whoso hath this World’s Good, and seeth his Brother have Need, and shutteth up his Bowels of Compassion from him, how dwelleth the Love of God in him!
  • My little Children, let us not love in Word, neither in Tongue, but in Deed and in Truth.

When we turn over the Pages of the sacred Volume and there observe the sublime Sentiments of Benevolence, Compassion, Forbearance, Forgiveness of Injuries, and Enemies, &c. enforced by the most powerful Arguments drawn from Life and Death, and the same exhibited in Perfection in his own glorious Person; we are ready to imagine, that all that call themselves his Disciples, are governed by these noble Principles.

But, alas! how great our Mistake! how few have imbibed the Sentiments, or are influenced by the Example of our benevolent, glorious moral Preceptor! How contrary will our Principles appear to those of our benevolent Master; if, while he could forgive his Enemies and Persecutors, and do Good to all as he had Opportunity, we upon an Affront or Injury done us, should encourage a Spirit of Resentment and Revenge, prosecute every such Injury, tho’ by legal Process, to the Utmost; and by this Means imprison and distress our Fellow-Men, and render Life to the last Degree tasteless.

Our Lord tells us:

  • the Kingdom of Heaven (or the Gospel Dispensation) is like to a certain King, who would take Account of his Servants; and when he had begun to reckon, one was brought unto him which owed him Ten Thousand Talents; but forasmuch as he had not to pay, his Lord commanded him to be sold, and his Wife and Children, and all that he had, and payment to be made.
  • The Servant therefore fell down, and worshipped him, saying, Lord, have Patience with me, and I will pay thee all: Then the Lord of that Servant was moved with Compassion, and loosed him, and forgave him the Debt.
  • But the same Servant went out, and found one of his Fellow-Servants which owed him an Hundred Pence; and he laid Hands on him, and took him by the Throat, saying, Pay me what thou owest: And his Fellow-Servant fell down at his Feet, and besought him, saying, Have Patience with me, and I will pay thee all.  And he would not; but went and cast him into Prison, till he should pay the Debt.
  • So when his Fellow-Servants saw what was done, they were very sorry, and came and told unto their Lord all that was done. Then his Lord, after that he had called him, said unto him, O thou wicked Servant, I forgave thee all that Debt, because thou desiredst me: Shouldest not thou also have Compassion on thy Fellow-Servant, even as I had Pity on thee? And his Lord was wroth, and delivered him to the Tormentors till he should pay all that was due unto him. So likewise shall my heavenly Father do also unto you, if ye from your Hearts forgive not every one his Brother their Trespasses.

We are not to understand that the Gospel obliges us to forgive every Man his Debts, upon his desiring the same; no: but the benevolent Principles of our holy Religion, will not, can not, prosecute, distress and imprison those of their Fellow-Men, whom Providence has rendered incapable of discharging their Obligations.   

I am, SIR, Your devoted humble Servant, N. N.


We all tend to think of our own present-day views as wise and enlightened and better than the antiquated thinking of days gone by.  It’s the conceit of the present.

And so, it is helpful, every now and then, to review the writings of days gone by and to appreciate and learn from the knowledge and wisdom of those who have gone before. 

The letter set forth above is one of those helpful opportunities.


Footnote 1.  The letter, published in 1755 (more than 260 years ago) at New Haven, Connecticut, is titled: “SOME REFLECTIONS ON THE LAW of BANKRUPTCY: WROTE At the Desire of a FRIEND: SHEWING, that such a LAW would be beneficial to the Publick, and analogous to REASON and our HOLY RELIGION.  AND By Him humbly recommended to the Consideration of the Publick.”  I have taken the liberty, in creating this condensed version, of adding sub-titles and of removing some antiquated words and using present-day replacements.

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