It isn’t hard to make the argument against debtors’ prison. But it took more than an argument to abolish the institution, mainly because it was so horrible that it worked, at least as a threat: few things motivate prompt repayment of money owed better than the prospect of a dark, dank dungeon where rats and smallpox thrive while men and women shrink and shrivel and starve and die. (Jailers provided food, bedding, and fuel for felons; debtors were left to fend for themselves.) Parliament didn’t ban the imprisonment of debtors until 1869. The practice ended much sooner in the United States. Imprisonment for debt was abolished in New York in 1831; the rest of the country soon followed.
What replaced it, as Harvard Law School’s Bruce Mann reported in “Republic of Debtors,” a landmark study of eighteenth-century financial failure, was something that has become a mainstay of American life: bankruptcy. Under the terms of the first U.S. bankruptcy law, passed in 1800, Pintard’s debts were discharged, his ledger erased, and his past, eventually, forgotten. Other countries have bankruptcy laws, too, of course, but they generally favor creditors; our laws favor debtors, and always have.
We have been bailing ourselves out, in other words, from the beginning. Lately, we’ve been bailing fast and furious, but not as fast as the water’s been rising. Eighty-six hundred Americans filed for bankruptcy in 1946; 191,729 in 1967; and 314,886 in 1980. An even steeper increase in the number of bankrupts since then is usually attributed to relaxed provisions of the 1978 Bankruptcy Code; non-business bankruptcy filings first topped a million in 1996. The 2005 Bankruptcy Abuse Prevention and Consumer Protection Act made it harder to declare bankruptcy by introducing means testing. In the spike just before that law’s implementation, the number of bankruptcy filings passed two million; the following year, in its aftermath, the number dropped to six hundred thousand, but it’s been creeping back up ever since. There were more than a million filings in 2008. Put another way: in 1946, one in seventeen thousand Americans declared bankruptcy; last year, one in three hundred did. This past November saw 5,075 bankruptcy filings daily, a thirty-seven-per-cent increase over the same month the year before. In 2009, about one and a half million filings are expected, although if Congress makes it easier for homeowners who file for bankruptcy to avoid foreclosure, that number could climb even higher.