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1787
The U.S. Constitu-
tion (Article I,
sec. 8) autho-
rizes Congress to
establish uniform
bankruptcy laws
throughout the
nation. Laws
passed in the suc-
ceeding century,
however, will be
short-lived.
1841
Bankruptcy Act of 1800 (2
Stat. 19) passes by one vote. The
rst federal bankruptcy law, the
Act authorizes district court judges
to appoint nonjudicial commission-
ers to oversee and help administer
bankruptcy proceedings. Applying
solely to merchant debtors with
cases initiated by creditors, the
Act allows discharges only if
two-thirds of creditors (in number
and dollar amount) agree. The Act
contains a ve-year sunset provi-
sion, in accordance with existing
English law.
1839
Federal law
abolishes imprison-
ment for debt.
Bankruptcy Act of 1841
(5 Stat. 440) grants district
courts “jurisdiction in all
matters and proceedings in
bankruptcy,” including develop-
ing rules for proceedings and
appointing bankruptcy com-
missioners and assignees. In
addition, the Act
• allows voluntary cases
• extends relief to all debtors
• allows discharge of debtors
who turn over assets
• provides for recovery of
fraudulent transfers and
preferences
• prohibits debtors from
using state law exemptions
1843
High administrative
costs, lack of state
law exemptions, and
creditor frustration
lead to the 1841
Act’s repeal.
1800
1803
Citing excessive costs and cor-
ruption, Congress repeals the
Act of 1800. For the next three
decades, the states will ll the
legal void. In 1819, the U.S.
Supreme Court bars states
from discharging debts to
citizens of other states.
Introducing
“Swedish
Nightingale”
Jenny Lind to
U.S. audiences,
promoter P.T.
Barnum soon
builds a vast
fortune. He
will file for
bankruptcy in
1877.
1850
Edgar Allan Poe
publishes “The
Raven,” seal-
ing his fame.
Financial woes
will dog the
author till his
death four
years later.
18451801
Thomas
Jefferson
(1743–1826)
begins his first
term as
President.
1819
When a Ken-
tucky business
venture fails,
John James
Audubon is sent
to debtor’s
prison. On
release, he will
embark on his
celebrated bird
painting series.
Considered
criminals, bank-
rupt individuals
in colonial
America were
commonly
imprisoned.
The Articles of
Confederation
had no provi-
sions for bank-
ruptcy law.
1798
Impoverished
by speculation,
Revolutionary
War financier
Robert Morris
is sent to debt-
or’s prison.
(Congress
enacts the first
bankruptcy law
in part to get
him out.)
1777
NAMES & FACES
American Numismatic Society
Federal
Judicial
Center
The Evolution
of
U.S. Bankruptcy
Law
a time line
This unique bankruptcy time line
maps the evolution of bankruptcy law
since its inception in 1787 in the
U.S. Constitution through 2006. It also
provides statistics demonstrating the
burgeoning bankruptcy caseloads, and
historical snapshots of select
sociopolitical events that occurred
along the way. Additional information
can be found on the Center’s websites.
Suggested by the bankruptcy courts
and advisory committees, this time
line is the product of a long-term
collaboration among bankruptcy judges,
court staff, the Administrative Ofce
of the U.S. Courts, and the Federal
Judicial Center.
1898 1938
1978
Bankruptcy Act of 1867
(14 Stat. 517) marks the rst time
Congress refers to district courts as
“constituted courts of bankruptcy” with
original jurisdiction in all bankruptcy
matters. The Act notably foreshadows
today’s debtor-friendly Chapter 12 and
13 provisions by introducing the “compo-
sition agreement” allowing debtors and
creditors to negotiate repayment—often
for less than full compensation. Other
key provisions of the Act include
• allowing district judges to appoint
nonjudicial assistants, known as
“registers in bankruptcy,” nominated
by the Chief Justice
• allowing debtors to choose between
state and federal exemptions
• requiring creditor consent to dis-
charge, or payment of a 50% dividend
The 1867 Act also includes corporations
under bankruptcy law for the rst time.
1874
Congress amends the 1867
Act so that debtors can create
a plan for distributing assets
among creditors as a way to
settle a case.
1878
In response to abuses and ex-
cessive fees, Congress repeals
the Acts of 1867 and 1874.
1867
7,345
1868
29,539
1869
5,921
Bankruptcy Act of 1898
(30 Stat. 544), is the rst long-term bankrupt-
cy legislation. In effect for the next 80 years,
the Act establishes the position of referee to
oversee administration of bankruptcy cases.
Referees are appointed to two-year terms by
the district judge and can be removed only
for incompetency, misconduct, or neglect of
duty. They are paid a percentage of funds
brought into the estate. Besides the referee
position, the 1898 Act establishes the ofce of
trustee (previously assignee) in bankruptcy.
In general, the Act is perceived as pro-debtor,
establishing relatively narrow exceptions
to discharge. Corpora-
tions are ineligible for
voluntary relief, but
some can be involun-
tary debtors. (Amend-
ments enacted in 1910
make corporations eligible
for voluntary bankruptcy.)
1899
22, 446
1932
70, 049
1933–1934
Amendments to the 1898 Act allow reorganization
for railroads and corporations as well as individual
debtors. Congress crafts the rst
municipal bankruptcy laws.
1936
On grounds of
unconstitutional interference with state sover-
eignty, Congress repeals the 1934 Act.
1932
The National Bankruptcy Conference is
created to study bankruptcy
reform.
1961
125,830
1937
Congress passes the re-
vised Municipal Bank-
ruptcy Act. Upheld by the
Supreme Court, the legis-
lation will come to be
known as Chapter 9
bankruptcy.
Chandler Act of 1938
(52 Stat. 840, 841), an over-
haul of the 1898 Act, reworks
previous reorganization
amendments into “Chapters”:
Chapter X for corporate
reorganizations, Chapter XI
for arrangements, Chapter
XII for real property arrange-
ments, and Chapter XIII for
wage earner plans.
1867
1946
Compensation of referees
is changed from a fee to
a salary basis.
Bankruptcy Reform Act of 1978
(92 Stat. 2657), superseding the 1898
Act, establishes bankruptcy courts in
each district and allows for separate
bankruptcy judges, appointed by the
President and conrmed by the Senate,
to serve 14-year terms beginning in
1984. While bankruptcy courts may now
hear all matters arising in or related to
bankruptcy cases, judges remain non-
Article III adjuncts of the district
courts. Also, a new Chapter
11 (replacing X, XI, and XII)
and Chapter 13, which offers a
“super” discharge, make ling
and reorganizing easier for
businesses and individuals.
(Western rather than Roman
numerals are adopted for
chapter titles.) The follow-
ing year a pilot U.S. trustee
program is established.
1960
The Supreme Court establishes the
Advisory Committee on Rules.
1964
Congress authorizes promulgation of
the Supreme Court’s Bankruptcy Rules.
1970
Amendments to the 1898 Act give referees
jurisdiction to determine the effect of bankruptcy
discharge. In addition, Congress creates the
Commission on the Bankruptcy Laws of the United
States to recommend changes to the laws reective
of current social and economic conditions.
1973
Per the Supreme
Court’s Rules of
Bankruptcy Procedure,
referees henceforth
are known as bank-
ruptcy judges and are
conferred nality on
ndings. The Commis-
sion on Bankruptcy
Laws submits its
report, including draft
legislation.
1994
1982
In Northern Pipeline Construction Co. v. Marathon Pipe Line Co.,
the Supreme Court declares the broad delegation of jurisdic-
tion to bankruptcy courts unconstitutional. The Court stays
its decision until October 4, 1982, to give Congress time to
respond. When Congress fails to meet an extended
deadline, the Ju-
di-cial Conference
and Administra-
tive Ofce propose
an Emergency
Rule allowing
the bankruptcy
system to con-
tinue operation.
Though adopted,
the x causes
many problems,
including delay of
judges’ pay.
1983
The Supreme
Court promul-
gates the Bank-
ruptcy Rules
and Ofcial
Forms to gov-
ern bankrupt-
cy proceedings
under the
1978 Act.
1984
Congress passes the Bankruptcy Amendment and
Federal Judgeship Act (98 Stat. 333), which re-
places the 1978 provisions dealing with jurisdiction,
venue, jury trials, and appeals. Bankruptcy courts
become units of the district courts, with ju-
risdiction by district court reference.
The circuit courts are authorized to
appoint bankruptcy judges to 14-year
terms. Bankruptcy courts are autho-
rized to enter nal orders on core
matters, with noncore matters
subject to de novo rule by the
district court, absent consent of the
parties.
Bankruptcy Judges, United States Trustees, and
Family Farmer Bankruptcy Act of 1986 (100 Stat.
3088) establishes Chapter 12 temporarily for family farmers and
makes permanent the U.S. Trustee program except in North Caro-
lina and Alabama, where
bankruptcy administrator
programs are established.
The trustee program moves
the appointing and over-
seeing of case and standard
trustees from the judicial
to the executive branch in
participating districts.
1983
374,734
1986
1990
725,484
Bankruptcy Reform Act of 1994
(Public Law 103-394) creates the sec-
ond National Bankruptcy Commission to
investigate changes in bankruptcy law.
The Act expands bankruptcy courts’
ability to hold jury trials in some pro-
ceedings and encourages circuit councils
to establish bankruptcy appellate panels.
1997
The National Bankruptcy Review Commission
recommends direct appeals from the bankruptcy
courts to the courts of appeals and changing
bankruptcy courts to Article III courts. The
commission is defunct as of November 19. Con-
gress disregards most of its recommendations.
1998
Congress passes the Religious Liberty and Charitable
Donation Protection Act of 1998, amending several
sections of the 1978 Act to limit the trustee’s power to
avoid debtor transfers to charities and churches of up
to 15% of gross annual income. For Chapter 13 cases,
a 15% income threshold is used to determine rea-
sonableness of claimed charitable contributions.
2005
2000
1,597,462
Bankruptcy Abuse Prevention and Con-
sumer Protection Act of 2005 (Public
Law 109-8), substantially amending the 1978 Act,
establishes a means test based on state median
income for individual debtors, makes credit coun-
seling a condition for relief, and requires nancial
management training for Chapter 7 and 13 debt-
ors to obtain discharge. In addition, the Act
• permits automatic dismissal if required docu-
ments are not led
• eliminates the Chapter 13 “super discharge”
• eliminates “strip down” on most auto-
mobile loans in Chapter 13
• allows waiver of the bankruptcy ling
fee and direct appeals to the court of
appeals in certain circumstances
The Act also makes Chapter 12 perma-
nent (and includes “family shermen”
with farmers); creates the role of
consumer privacy ombudsman; and
recognizes international insolvency
cases.
1860
Abraham
Lincoln (1809–
1865) is elected
President.
In a rematch,
Joe Louis, aka
the “Brown
Bomber,”
defeats Max
Schmeling in
two minutes,
four seconds.
1938
Samuel
Clemens, aka
Mark Twain,
publishes
“Huckleberry
Finn” to wide
acclaim. A
company
formed by the
author will file
for bankruptcy
ten years later.
1884
Ford Motor Co.
rolls out the
Model T, putting
ordinary
Americans in
the driver’s
seat. (Founder
Henry Ford’s
first two auto-
mobile compa-
nies failed.)
1908
Eddie Cantor
stars in Florenz
Ziegfeld’s
famous Follies.
By 1930, bad
investments
and free spend-
ing will leave
The Great
Ziegfeld
bankrupt.
1917
Harry S. Truman
(1884–1972)
assumes the
Presidency
when
Roosevelt
dies 82 days
into his fourth
term.
19451923
Lois Wilson
stars in Para-
mount’s “The
Covered Wag-
on.” Meanwhile
Walt Disney’s
Laugh-O-Gram
Studio files for
bankruptcy (as
will Paramount
in 1932).
1881
Ulysses S.
Grant, retired
general and for-
mer President
(1822–1885),
joins an invest-
ment banking
partnership.
Three years
later a swindle
will ruin him.
1953
Leontyne Price
dazzles crowds
in “Porgy and
Bess.” Oscar
nominee
Dorothy
Dandridge will
play Bess in
the 1959 film
version.
1999
In existence
since 1851,
The Singer
Company files
for Chapter 11
bankruptcy pro-
tection, partly
as a result of
global shifts in
garment manu-
facturing.
1989
Unable to com-
pete following
industry
deregulation,
Eastern Air
Lines files for
bankruptcy pro-
tection. Its
last flight will
be in 1991.
With public
interest in
trains dying,
toy maker
Lionel
Corporation
files for
bankruptcy.
A reconfigured
Lionel will file
again in 1991.
1967 2001
Having lost
ground to
foreign
competitors,
Bethlehem
Steel files for
bankruptcy
after nearly
150 years in
business.
1972
President
Richard M.
Nixon (1913–
1994) wins
reelection,
beating George
McGovern in a
landslide.
1902
The highly
successful (but
quite different)
stage version
of L. Frank
Baum’s “The
Wonderful
Wizard of Oz”
opens in
Chicago.
1948
Vic Damone
croons on
radio’s
“Saturday Night
Serenade.”
1962
Partly due to
the failure of
its unreliable
Predicta line,
radio and TV
maker Philco
is forced to file
for bankruptcy.
1979
2002
As ever more
customers
flee to big-box
discounters,
Kmart Corp.
files for bank-
ruptcy protec-
tion. “Big K”
will emerge as
Kmart Holdings
Corp. the fol-
lowing year.
Owens-Corning
Corp. emerges
from Chapter
11 when its
reorganization
plan becomes
effective on
October 31.
2006
To avoid bank-
ruptcy, Chrysler
Corp. petitions
Congress for $1
billion in loan
guarantees.
CASES FILED
