1825 John Quincy Adams - Bankruptcy Clause

One of President John Quincy Adams first requests of Congress was to enact a new bankruptcy law, similar to one of the last acts his father signed as President.  John Quincy Adams was no stranger to bankruptcy laws for he was appointed as a bankruptcy commissioner under his father's law.  It was a last minute appointment under the 1801 Judiciary act that created 16 new "Midnight Judges" and was passed by the Federalists during the last 19 days of the first Adams administration.   It was only a brief appointment thought, because one of Thomas Jefferson's first act as president and leader of the opposition party (Democratic Republicans) was to repeal the 1801 Judiciary act eliminating seat of the bankruptcy commissioner that John Quincy Adams held.  Was John Quincy Adams' request a political one, or just the right thing to do?

In the colonial era, many of the states had bankruptcy laws that were based on English law and imprisonment for debt was commonplace.  Even after the Constitutional Convention of 1787, bankruptcy law remained at the state level, but written into the constitution was a Bankruptcy clause authorizing the federal government to establish uniform laws on the subject of Bankruptcies throughout the United States (Article I, Section 8, Clause 4).  For most of the first century of our nation, this clause went unexercised except for a few brief moments when bankruptcy acts were in effect.  The first of these acts was the Bankruptcy Act of 1800 signed by President John Adams following a financial panic that caused widespread ruin.   When state bankruptcy courts imprisoned thousands of debtors including Robert Morris a financier of the Revolution and threatened many others like Supreme Court Justice James Wilson. Congress rushed to action and passed  the 1800 act as a temporary measure that was to expire in 5 years.  The act was modeled after a 1732 English act, and proved to be a creditors' remedy only.   Only creditors with proper proof could act on a bankruptcy.   If the bankruptcy commissioner certified to a federal district judge that the debtor had cooperated and two-thirds of the creditors consented to a discharge, the debtor would receive a graduated allowance out of the estate.  The act was repealed three years later during the Jefferson administration.

John Quincy Adams was quite familiar with bankruptcy law.  Besides, the fact that it was his father who signed it into law, John Quincy Adams also served briefly as one of the commissioners.   John Quincy Adams had just returned to America and was trying to re-establish his law office and residence in Boston.  During the last days of his fathers administration, the Judiciary Act of 1801 also known as the law of 'Midnight Judges" expanded the court system, and 16 new judges were hastily confirmed to the circuit court.  Along with these judges, came appointments to commissioner of bankruptcy including that of John Quincy Adams.  These were highly political and highly profitable positions, not a bad deal for young and inspiring lawyer and politician.  (Shown above is a notice to execute commission based on bankruptcy filed under the Act of 1800 with John Quincy Adams acting as the commissioner).   But this was also an election year, and the friendship between the Senior Adams and Thomas Jefferson had become quite severed.  John Quincy Adams sought eagerly sought help from his political friends to get re-appointed under the new Jefferson administration, but before any new appointments were made, Jefferson repealed the Judiciary Act of 1801 and Adams was out.  Mrs. Abigail Adams was furious and it created a rift between Mr. Jefferson and Mrs. Adams.  President Jefferson wrote to Abigail Adams, that it was not intentional, " I conclude then he must have been a Commissioner of bankruptcy. but I declare to you on my honor that this is the first knolege I have ever had that he was so. it may be thought perhaps that I ought to have enquired who were such, before I appointed others.  but it is to be observed that the former law permitted the judges to name Commissioners occasionally only for every case as it arose, & not to make them permanent officers"  In the end, the Bankruptcy Act yielded only small dividend and travel to distant federal courts kept the frequency very low, and by 1803 the 1800 act was repealed.

Then, 22 years later, this one-time Bankruptcy commissioner became President and it seems he wanted to resurrect the bankruptcy act.  Indeed, a lot had changed since 1803.  In that same year, the English "Bankrupts Act 1825" was passed and for the first time, English debtors could initiate their own bankruptcy proceedings.  It marked a beginning of a time when both creditors and debtors started to see the bankruptcy process as a real means to resolving an issue.  President John Quincy Adams felt it was time for the United States to get it's act together, so during his first State of the Union Address, he urged Congress to act on the Bankruptcy Clause and establish a new set of uniform federal regulations of bankruptcy.  Believe it or not, Adams put it on equal par with "organizing, and disciplining the militia".  While, Adams did not reference the English law directly, he did speak of "personal liberty" and the "claim of the individual citizen", two concepts introduced in the "Bankrupts Act 1825".

"Among the powers specifically granted to Congress by the Constitution are those of establishing uniform laws on the subject of bankruptcies throughout the United States and of providing for organizing, arming, and disciplining the militia and for governing such part of them as may be employed in the services of the United States. The magnitude and complexity of the interests affected by legislation upon these subjects may account for the fact that, long and often as both of them have occupied the attention and animated the debates of Congress, no systems have yet been devised for fulfilling to the satisfaction of the community the duties prescribed by these grants of power.
To conciliate the claim of the individual citizen to the enjoyment of personal liberty, with the effective obligation of private contracts, is the difficult problem to be solved by a law of bankruptcy. These are objects of the deepest interest to society, affecting all that is precious in the existence of multitudes of persons, many of them in the classes essentially dependent and helpless, of the age requiring nurture, and of the sex entitled to protection from the free agency of the parent and the husband."

Unfortunately, Congress did not act and it would not be until 181 when the second Bankruptcy law would be enacted.

References

Presidency.ucsb.edu. (2017). John Quincy Adams: First Annual Message. [online] Available at: http://www.presidency.ucsb.edu/ws/index.php?pid=29467 [Accessed 22 Dec. 2017].

Founders.archives.gov. (2017). Founders Online: From Thomas Jefferson to Abigail Smith Adams, 11 September 1804. [online] Available at: https://founders.archives.gov/documents/Jefferson/99-01-02-0348 [Accessed 22 Dec. 2017].

Stateoftheunionhistory.com. (2017). 1800 John Adams - "Midnight Judges". [online] Available at: http://www.stateoftheunionhistory.com/2016/02/1800-john-adams-midnight-judges.html [Accessed 22 Dec. 2017].

Teed, P. (2006). John Quincy Adams: Yankee Nationalist. Nova Publishers.

The History of the Bankruptcy Laws in the United States. (2017). [ebook] Available at: http://www.law.du.edu/documents/registrar/advanced-assignments/2009-fall/Sousa-Bankruptcy.pdf [Accessed 22 Dec. 2017].

https://upload.wikimedia.org/wikipedia/commons/8/87/Philip_Nicholas_Bankruptcy_Proceeding%2C_signed_by_John_Quincy_Adams_as_Commissioner.jpg