We’ve come to the third and last installment of our overview of the history of bankruptcy law in the west (and specifically the United States). Though we’ve been able to see bits and pieces of modern-day law developing throughout history, much of the law has looked quite different from what we know today. If you recall, western bankruptcy law in its infancy did very little to protect the debtor and was used almost completely as a means for the creditors to either ruthlessly get their money back or to exact revenge on the debtor when he was unable to pay. In this last post, we will look at the most recent history of bankruptcy law that will explain how we have gotten to where we are today.
Picking up where we left off last time, the next major reform came with The Bankruptcy Reform Act of 1978, often simply referred to as “The Bankruptcy Code.” It went into effect on October 1, 1979 and contained four sections or “titles.” The details of each of the four titles are technical in nature and quite a bit could be written about each one, so we won’t cover them in detail here.
In addition to establishing and defining the four titles, the 1978 Act also dramatically altered the courts themselves by conferring pervasive subject matter jurisdiction to the courts. The act granted jurisdiction over all “civil proceedings arising under title eleven or arising in or related to cases under title 11.” 28 U.S.C. §1471(b) These new bankruptcy courts were designated as adjuncts of the district court, but for all intents and purposes, they operated as free-standing courts apart from the district court. The newly-granted jurisdiction was given to bankruptcy judges who would continue to be Article I judges appointed for a set term.
Though many of the changes made with the 1978 Act served the general population better than previous bankruptcy law, the provisions of the Act weren’t without scrutiny by some. Take, for example, the case of Northern Pipeline Co. v. Marathon Pipe Line Co. in 1982. In this case, the court determined that the wide grant of jurisdiction given to bankruptcy judges was unconstitutional because those judges were not appointed under and protected by the provisions of Article III of the Constitution. While the technical details of this case are fascinating, the explanation is too lengthy to detail here; however, the important part to note is that this decision paved the way for the next set of reforms to be made.
Because of the court’s ruling that the appointment of the judges and their broad jurisdiction was unconstitutional, the law needed to be adjusted. In the time immediately following the 1982 case, Congress put into place the “Emergency Rule” until such a time where something permanent could be hammered out and put into effect. It’s interesting to note that many challenged even the constitutionality of the “Emergency Rule” itself, so it was clear that something permanent needed to happen.
Finally, in 1984—two years after the initial Marathon case, Congress implemented a “permanent” solution with the Bankruptcy Amendments and Federal Judgeship Act of 1984. In many ways, this act resembled the Bankruptcy Act of 1898 (which we covered in previous blog posts) by re-designating separate units for judges under the district court.
Since 1984, a couple more acts have been passed, including one in 1986 and one in 1994. These acts dealt more specifically with cases of family farming and mortgage and banking, respectively. Today, bankruptcy cases in America are all subject to the rules spelled out by these reforms.
Though this three-part series has only been the most basic of a review of how bankruptcy law developed in the west, and more specifically, in America, it should give you a clear picture of just how complex and involved bankruptcy law can be. Also, because things are constantly changing, getting the best bankruptcy settlement requires the knowledge of someone who has studied the law and is up to date with the very latest changes to the laws. In case you missed them, click here to view Part 1 and click here to view Part 2.
At Burr Law, our bankruptcy attorneys are experts and their expertise means they will use the law to your advantage, always working for the best possible outcome for you. After all, bankruptcy law is all about protecting you and looking out for your future. Always keep in mind that the laws that exist are there to protect you.
If you’re facing a tough financial situation and need more information about bankruptcy, please don’t hesitate to contact one of our Milwaukee bankruptcy attorneys and let us help you.