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As of the late 1920s, on the eve of the New Deal, general bankruptcy lawyers and the reorganization bar remained almost entirely distinct. Like the reorganization bar, general bankruptcy lawyers were notoriously clannish, even for lawyers, and they tended to congregate in urban areas – especially the urban Northeast. Distinguishing the two bars was an enormous gulf in status and class. Unlike reorganization lawyers, the general bar was distinctly nonelite. From the earliest days of the 1898 act, general bankruptcy lawyers fought a continuous battle to rise above their mildly unsavory reputation.
A great irony of New Deal bankruptcy reform is that this somewhat unsavory bar, unlike its corporate reorganization counterpart, survived the New Deal unscathed – indeed, the bar emerged from the 1930s stronger in many respects than it had been at the outset of the decade. This chapter explores the how and why of the general bankruptcy bar’s success. Although the chapter places particular emphasis on the growing importance of the bankruptcy bar, the competing interests that were melded together in the 1898 act continued to set the parameters within which the influence of bankruptcy professionals played out. Ever since 1898, American bankruptcy law has been defined by creditors, the prodebtor forces unleashed by federalism, and the bankruptcy bar.
The relationship between these interests and the political parties was very much in flux. Democrats remained more sympathetic to prodebtor views, and creditors exerted much of their influence through the Republican party. By the end of the 1930s, however, Democrats rather than Republicans would be the principal advocates of expansive federal bankruptcy legislation, as the New Deal culture took hold. After the 1930s, creditors, prodebtor interests, and bankruptcy professionals would continue to dominate the bankruptcy debates, but party affiliation would fade further and further into the background.
Reprinted by permission of Princeton University Press (www.pupress.princeton.edu)