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Debt’s Dominion: A History of Bankruptcy Law in America, an excerpt from a new book by Prof. David A. Skeel, Jr.

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Debt's Dominion by Prof. David A. Skeel, Jr. 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9

This chapter begins by describing the general bankruptcy bar of the 1920s and the early 1930s – picking up, in a sense, where the discussion in chapter 1 left off. In addition to briefly profiling several of the leading members of the bar, the first section describes the Donovon and Thacher investigations that were prompted by complaints about bankruptcy practice. The next section then provides the theoretical apparatus for understanding the influence of bankruptcy lawyers and referees, as well as the limits of this influence. After a brief introduction to interest group theory, the section discusses a variety of interest groups other than lawyers, each of which has an important stake in the bankruptcy process – including debtors, borrowers who do not file for bankruptcy, unsecured creditors (that is, creditors whose loans are not collateralized), and secured lenders. Unlike each of these groups, whose influence is limited in one or more ways, bankruptcy professionals are well coordinated and have an enormous, ongoing stake in the shape of bankruptcy law. After discussing the nature of bankruptcy professionals’ influence, the chapter chronicles the two most dramatic examples of the bar’s success: the rapid demise of the proposed administrative reforms in 1932 and the expansion of general bankruptcy practice in 1938. Of particular interest is the role of the National Bankruptcy Conference, which was formed after the initial bankruptcy hearings and has become the single most prominent influence on bankruptcy legislation. The chapter concludes by briefly considering several issues – such as exemptions and individual rehabilitation plans – that underscore the continuing relevance of creditors and populist ideology.

THE DONOVAN AND THACHER INVESTIGATIONS

The bankruptcy bar benefited almost immediately from an effective lobbying base and from the efforts of several visible spokesmen. The Commercial Law League devoted much of its energy to bankruptcy issues; the American Bar Association could be counted on for support; and such prominent leaders as Frank Remington spoke and wrote widely and regularly testified before the House and Senate Judiciary Committees.

In the era after World War II, after the cries for bankruptcy repeal had largely subsided, a new group of bankruptcy leaders emerged. A particularly good example is Reuben Hunt, who would figure prominently prior to and throughout the New Deal. Located in California, Hunt, like many bankruptcy lawyers, represented a wide range of individuals and small businesses. From the 1920s on, he became increasingly prominent in the Commercial Law League, holding a variety of leadership posts and penning regular commentary for the Bulletin (which was later renamed as the Commercial Law Journal).5 Hunt also served on the Commercial Law Section of the ABA, and in each of these capacities, he testified regularly before Congress.

 
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