Book the Second, Chapter 31: Of Title by Bankruptcy
This chapter is about how law makes bad things good. Bankruptcy turns bad behavior into personal renewal; unpaid debts become a way to make good on the social promise of security. Law is full of these perverse transmutations – perhaps symbolized in the way Justice’s blindfold makes a virtue of disability. But alchemizing redemption from transgression turns out to be a tricky business. There’s persistent conflict between creditors’ rightful expectations and borrowers’ relief, and doubts about a debtor’s character cloud the opportunity to become “a clear man again.” II, 484 Only individuals of “honest and ingenuous disposition” are entitled to escape their obligations through bankruptcy. Id. In Blackstone’s England, separating these deserving folks from ones whose financial problems come from “misconduct and extravagance” seems to have hardened the borders of a rigid class hierarchy. In the U.S. today it deepens the tectonic rift of race.
Blackstone’s tale of transformative improvement begins with the law itself. He describes the historical swing of bankruptcy from ancient Rome’s “terrible law” (debtors were chopped to pieces), to the too-lenient system “introduced by the Christian emperors,” to the current English statutes that “more wisely, have steered in the middle between both extremes. ” II, 473 The moderate English system confers protection “not only on the creditors, but also on the bankrupt or debtor himself.” II, 472 Thus the law achieves a delicate balance “calculated for the benefit of trade, and founded on the principles of humanity as well as justice,” II, 473, a compromise position much approved by Blackstone who, after all, self-identified as a “Man of Moderation.”
This Goldilocks version of bankruptcy is the sort of thing that drove Blackstone’s great contemporary critic, Jeremy Bentham, crazy. Bentham trashed Blackstone’s “everything is as it should be” approach to law as a fairy tale spun to fool credulous English citizens into believing in an irrational legal system that utterly failed to deliver justice. Like Bentham, I’m put off by the Commentaries’ moderate approval of the moderate common law, but I doubt my distaste has much to do with justice. Blackstone’s moderation reminds me of my mother.
Like Blackstone, my mother was nothing if not moderate, and tended to accent the positive. When I was young, her self-containment, and her great, but always properly modulated, enjoyment of small things – a perfectly ordinary piece of crusty bread, the thin lip of a good coffee cup – used to infuriate me. Even when, near the end of her life, dementia unleashed her pleasures from conventional limits, they never became intense or volatile, but simply spread – calmly – across the entire world. “Oh, look at that beautiful red,” she’d say, pointing to a traffic light. Bentham saw Blackstone’s moderate, optimistic view of law as a lie, a way to cover up law’s conflicts and biases, or a foolhardy failure to recognize them. But over the course of the last decade or so, I’ve come to think that Bentham missed the moral ambiguity of Blackstone’s work, just as I took my mother’s calm for shallowness and missed the conflict beneath her smooth surface. And I almost think that working my way through Blackstone’s thoughts has helped recalibrate my judgment of my mother. I even wonder if I began reading – or kept reading — these off-putting books because something in them reminded me of the mild maternal opacity that so frustrated me. And you know those traffic lights really are a beautiful color.
Blackstone’s placid approval of English bankruptcy law gets troubled as he struggles to justify who is eligible for debt relief. In the system he describes, bankruptcy is reserved for tradespeople – merchants of one kind or another. The mercantile economy is based on “mutual credit on both sides,” so debts are “not only justifiable, but necessary.” II, 474 Because a trader depends on credit, he is exposed to “accidental calamities,” a ship that goes down in a storm, or, more prosaically, another merchant or customer’s failure to pay. Bankruptcy is compromise that gives back something to the people owed without utterly destroying the tradesman whose inability to pay up comes “through misfortune and not his fault.” Id.
Blackstone stresses that bankruptcy is only for “actual traders.” II, 473 Just because you buy on credit doesn’t mean you can resolve unpaid debts through the bankruptcy process. Farmers, for instance, don’t qualify, even though they have to buy seed and sell what they grow, because buying and selling is only instrumental to their real occupation, which is “to manure and till the ground, and make the best advantage of its produce.” II, 475 An innkeeper is likewise out of luck, “though he may buy corn and victuals to sell again at a profit,” because “that no more makes him a trader than a schoolmaster or other person is, that keeps a boarding house and makes considerable gains by buying and selling.” II, 476
Now, hang on, though, wait a minute. Why is it wrong, or undesirable, for someone who is not exclusively a “trader” to rely on credit? Blackstone’s explanation that “trade is not their principal, but only a collateral, object” is really no explanation at all. II, 475 They probably do less buying and selling than full-time merchants, but so what? Why should that justify excluding them from bankruptcy relief? Don’t we want them to be able to buy in bulk at good marginal prices in quantities that they might be unable to afford without credit? And if something goes amiss somewhere in this chain of credit, surely it is no more the innkeeper’s or farmer’s fault than the full-time tradesman’s. All this looks even stranger when you consider that in Blackstone’s day, bankruptcy wasn’t a process borrowers could initiate, but something done to them by creditors trying to get back some of what they were owed. From the point of view of a wholesaler or shopkeeper who hasn’t been paid, it hardly matters whether the deadbeat is another merchant or a farmer.
One possible explanation emerges when Blackstone almost offhandedly adds that letting farmers go bankrupt might allow them to avoid paying overdue rent, depriving landlords “of the security which the law has given them above all others.” II, 475 In eighteenth-century England landowning was still the bedrock of social and political power. Any law that disrupted landlords’ control of their tenant farmers threatened to destabilize the class hierarchy.
But keeping a gentle boot on a tenant’s neck can’t explain why bankruptcy was not available to the landed gentry themselves. And according to Blackstone, they are also to be excluded. In fact, Blackstone reserves his harshest words for members of the upper classes who deal on credit: “If a gentleman or one in a liberal profession, at the time of contracting his debts has a sufficient fund to pay them, the delay of payment is a species of dishonesty . . . .” II, 474 On the other hand if he incurs debts but “has no sufficient fund” with which to pay them off, “the dishonesty and injustice is the greater.” Id. A gentleman who gets into trouble borrowing “cannot . . . murmur if he suffers the punishment which he has voluntarily drawn upon himself.” Id.
Then again, maybe denying upper class people bankruptcy relief does serve to keep the familiar social hierarchy in place, not by benefiting wealthy individuals, but by preserving the apparent naturalness of existing class boundaries. Perhaps some unlucky rich borrowers need to be sacrificed to keep doubt from creeping in about the inevitability and morality of a social structure based on class differences that are ostensibly stable and transparently real.
There is an anxiety about authenticity here. Using credit to support an upper class lifestyle, and especially borrowing and then being unable to pay, casts doubt on the idea that the folks at the top really are different from the folks at the bottom. A real gentleman has funds to support an extravagant lifestyle or, if he doesn’t, he accepts diminished economic circumstances as a badge of dignity. By declining to pretend that his income is higher than it actually is, he establishes that social status does not depend on shifting external factors. Merchants who borrow are not pretending to be something they are not, they are simply doing what “actual traders” do. But professionals and gentlefolk who borrow to support their lifestyle undermine the integrity of the upper classes. They make it seem like performing a show of wealth is as good as being an actual gentleman, or, worse, that the performance is all there is to it.
You might think the old English law’s restrictions on eligibility and Blackstone’s anxious attempt to police those social boundaries distinguish the bankruptcy process he describes from the system we have in the U.S. today. But on closer view, there are some haunting similarities.
Unlike the system Blackstone describes, bankruptcy in the U.S. today is not formally restricted to any particular social group. But individual bankruptcy relief in the U.S. follows two quite different procedural tracks under two different statutes known as “Chapter 7” and “Chapter 13,” often with very different results. Chapter 7, or “liquidation” bankruptcy is a relatively simple, fast-moving process in which debtors hand over their property (with some exemptions, e.g., an inexpensive car and retirement accounts). The property is sold, and the proceeds are distributed among the registered creditors. In practice, the process usually is made even simpler by the reality that most families who file under Chapter 7 have no significant assets to turn over. The result is that a few months after filing about 96% of Chapter 7 debtors emerge from bankruptcy with all their unpaid medical bills and unsecured consumer debt discharged. Pro Publica
In contrast, Chapter 13 bankruptcy enrolls petitioning borrowers in a three- to five-year court supervised payment regimen. I know little to nothing about bankruptcy law, but one thing that comes through clearly from people who do is that the difference between the Chapter 7 and Chapter 13 is stark. Bankruptcy is never going to be pleasant, but Chapter 13 is far more disruptive to people’s lives and requires much greater submission to public process. As one bankruptcy judge explains, “Chapter 13 is no walk in the park. It requires public disclosure of every aspect of your life, examinations under oath by a trustee and creditors, allowing creditors to haul you into court on any objection, and relinquishment of control of your financial life for up to five years. If you falter, your case will be dismissed and you will lose the entire benefit of the bankruptcy law.” A pair of social scientists puts it more succinctly: “Chapter 13 filing is substantially more costly, more time consuming, and less likely to discharge debts than a Chapter 7 filing.” (Morrison, Pang and Uettwiller at 270).
Here’s the main thing you need to know about Chapter 13 bankruptcy relief: Most of the time it doesn’t work. About two thirds of Chapter 13 filers never manage to complete the process. They wind up still saddled with the debt that drove them into bankruptcy in the first place. Id.
Theoretically anyone with an income higher than the state median must use Chapter 13. That rule is the result of legislative reforms in 2005 that were driven by an attempt to tighten what was seen as Chapter 7’s too easy-going process. As Senator Chuck Grassley declared at the time, Chapter 7 allowed “anyone to get free debt cancelation . . . with no questions asked, even if they have the means to pay off their debts.” (Cong. Rec., Lawless 356) But, despite the new means test, perhaps because of exemptions for necessary expenses, bankruptcy filers under Chapter 7 and Chapter 13 are still mostly in the same general income bracket. There is, however, another salient difference. Black Americans who file for bankruptcy are much more likely to use Chapter 13 than Americans of other races. Around 55% of African American bankruptcy debtors file their cases under Chapter 13, compared with only about 27% of other filers. ABI Commission on Consumer Bankruptcy Report at 159.
On the face of it, African Americans’ overrepresentation in Chapter 13 makes no sense. The legal factor forcing bankruptcy filers into Chapter 13 is higher income, and White Americans typically have higher incomes than Blacks ($76,057 v. $45,438 median annual household income in 2019). Theoretically, Chapter 13 allows debtors to preserve valuable assets. Again, though, that would seem to favor White debtors on average, because the disparity in assets between White and Black Americans is even greater than the income gap. (Typical Black household wealth in 2019 was about one-eighth that of Whites.)
So what is going on? One possibility is that exactly because wealth is less common among African Americans they are willing to do more to hold onto hard earned assets, and choose Chapter 13 in order to do so. But there’s no evidence to back up this speculative just-so story. A recent empirical study of bankruptcy filings in Chicago offers a different explanation, finding that African Americans are more likely to need some specialized relief that Chapter 13 offers. Chapter 13 filers not only keep valuable property, they can force the return of some assets that have been seized, notably cars and driver licenses. The study authors conclude that, in the Chicago area, the racial disparity in Chapter 13 filers is due at least in part to the fact that “African Americans are more likely, on average, to experience debt enforcement actions, including seizure of a car or driver’s license,” and to live farther from their workplaces and so to have a greater need for a car and license in order to get to work. Morrison et al. 272
Some would attribute the higher rates of traffic and parking tickets among Black Americans to discriminatory law enforcement and explain longer commutes as the lingering effect of housing segregation due to the historic, and, in many cases lingering, exclusion of African Americans from many neighborhoods. See Richard Rothstein. Doubtless others would view the car study as confirming racial stereotypes, assuming that Blacks are more likely to commit traffic and parking offenses and to fall behind on car payments, in other words, to engage in the sort of selfish, irresponsible behavior that should not be exonerated by bankruptcy relief. Meanwhile, another study has turned up evidence that these sorts of stereotypical assumptions and discriminatory attitudes play a much more direct role in Chapter 13’s racial imbalance.
Three social scientists surveyed over 250 bankruptcy attorneys across the U.S., telling them, truthfully, that the researchers were studying “attorneys’ perspectives on bankruptcy and chapter choice.” Braucher, Cohen, Lawless. What the lawyers were not told was that racial differences in chapter choice were the specific target. All the study participants received the same basic case file about a fictional couple with background facts that might reasonably lead a lawyer to recommend either Chapter 7 or Chapter 13. But in some of the surveys the prospective clients were named Reggie and Latisha and went to Bethel AME church, while in others their names were Todd and Allison and they attended the First United Methodist Church. (A control group couple was identified only by initials and said to attend “church.”) The one other variation was that in some of the surveys the couple expressed a specific preference for either Chapter 7 or Chapter 13.
The racial differences in the survey results were stark. Attorneys recommended Chapter 13 to Reggie and Latisha 47% of the time but only 32% of time for Todd and Allison. Braucher et al. 22. In fact, the bias toward recommending Chapter 13 for African Americans was strong enough that, based on otherwise identical facts, the attorneys actually recommended chapter 13 to the African American clients who expressed a preference for chapter 7 at a rate slightly higher than the rate for Whites who came in preferring chapter 13! There’s more. The survey turned up striking differences in the attorneys’ attitudes about Black and White clients’ personal responsibility for their financial troubles.
Attorney participants were asked to rate whether the couple seeking their advice had “good values.” When hypothetical African‐American clients or clients with no distinguishing racial information expressed a preference for Chapter 7, the attorneys tended to rate them as having worse values than a couple who expressed no preference or a preference for Chapter 13. As the study authors note, “Presumably, the couple’s expressed preference for chapter 7 makes it more likely that attorneys will see them as illegitimately trying to escape paying off their debts.” But for White clients, the results were reversed. Whites who preferred Chapter 7 were typically seen as having better values. Apparently, as the study authors observe, “a white couple expressing a preference for chapter 7 does not raise as much suspicion of the couple’s values,” as it does for nonwhite couples.
The idea that Black Americans’ motives and values are always suspect is tragically familiar. It seems odd, though, that in Whites a preference for Chapter 7’s quick relief was perceived as indicating better values as against other White couples who chose the harder, longer Chapter 13 process, which would ultimately pay back more of what they owed. It’s as if Whiteness confers a positive entitlement to a “fresh start” that is not only deserved but somehow required for the good of others. Braucher et al. 27 In this view, deserving (White) debtors who find themselves in financial trouble not only could, but should, take advantage of a legal method that will quickly free them from their obligations. Talk about making bad things good!
It strikes me that we may be seeing here the re-emergence of bankruptcy law as a device for shoring up shaky social boundaries. In eighteenth-century England, concerns for the resilience of a hereditary class structure show up in Blackstone’s worries about gentlemen acting like tradesmen, perhaps triggered by what historian Wilf Prest describes as that society’s “complex web of overlapping interactions between commercial, landed, and professional worlds.” Wlliam Blackstone Law and Letters in the Eighteenth Century 17 In the U.S. today, almost everyone would insist that we devoutly wish to put an end to racial inequity. But undeniably, the bi-polar division of African-Americans and Whites continues to be one of the most basic ways in which our social world is ordered, and one of the deepest, and most fraught, social fault lines. Perhaps it should be no surprise, then, that bankruptcy would be called upon – along with practically every other legal structure – to police that racial line.
If this structuralist account captures some similarities in the otherwise quite different eighteenth-century English and current U.S. bankruptcy regimes, Blackstone’s concerns about bankruptcy’s class limits and my focus on its racial effects may have something else in common. Oddly, it’s our relationships with our mothers. My own interest in racial equity is undoubtedly traceable both to the horrifically racist world where I grew up on Chicago’s South Side, and to the influence of my mother, whose belief and participation in civil rights, like everything else about her, was quiet, careful, and utterly consistent and unyielding. Likewise Blackstone’s insistence that authentic gentility required paying all one’s debts may be traceable to his mother’s example.
Blackstone’s father, who died before Blackstone was born, was a silk merchant, who Blackstone described as “a London tradesman, not of great affluence.” Prest 14 His mother, came from “a family of minor landed gentry,” who had recently purchased, rather than inherited, their estate. Prest 16. Blackstone’s father had a shop that besides trading in silk, sold some retail goods, such as “belts, sashes, cord, gloves and lace.” Prest 15 When he died, Blackstone’s mother took over a business with debts that greatly exceeded its assets. Apparently, she was up to the task. She acquired a partner, printed up business cards (“Mary Blackstone and William Hay: At the Blew Boar near the Conduit”), and managed to turn things around. At her death—sadly, when Blackstone was only eleven–she left a thousand pounds to be divided amongst her late husband’s creditors, explaining that she was not “intirely satisfied how strictly justly I might proceed by quite excluding” them from the estate. Prest 20 It is easy to imagine the eleven-year-old Blackstone attributing this gift (from funds that otherwise would have been partly his) to his mother’s noble character. Prest comments that Blackstone’s own “sense of personal responsibility” may have been “part of his mother’s legacy.” 21
It’s also possible that Blackstone saw his mother’s insistence on paying her debts as evidence of authentic nobility on one side of his family tree, a notion that may have made it easier for him to imagine himself worthy of the much elevated status he eventually attained. Blackstone climbed the social ladder through a combination of luck, extraordinary literary ability, hard work, and enormous drive. Doubtless he reveled in his personal success and celebrity. But no matter how much one longs to be recognized for one’s unique talents and accomplishments, in the end most of us also want to see ourselves enmeshed in social and familial networks that connect our achievements to others, that make us, among other things, our mothers’ children.