Sec. 4. The Extent Of The Federal Power; Constitutionality Of Present Act

The Congress is given power to pass uniform laws on the subject of bankruptcies. The only inhibition is that the laws must be uniform. This refers to territorial uniformity and does not forbid the recognition by general language of local laws to affect the application of the act. The present bankruptcy act is constitutional.

We have seen in the last section that the United States has jurisdiction, expressly conferred in the constitution to enact laws on the subject of bankruptcies, and that its action upon the subject causes the suspension of state acts covering the same ground. We have now to inquire as to the extent of that power conferred upon the Federal government - what limitations are placed upon the power? We find that, outside of the limitations that apply generally to all acts of Congress, there is but one limitation - the law must be uniform. But what is meant by uniformity? Does it mean that the act must affect each individual exactly in the same way irrespective of local laws? Is the federal government forbidden to recognize local laws as to validity of liens, rights of exemption, and so on? It is well settled that the uniformity meant is a uniformity in this sense - that Congress must pass a law which shall be general in its provisions to affect all parts of the country alike.11 It cannot pass a bankruptcy law that shall apply to some states and not to others. It cannot pass one law for the east and another for the west. But it is not forbidden to say in general terms that state laws as to exemptions and other rights of debtors or creditors shall not be affected by the act.12

8. U. S. Const. SEC. 10.

9. Sturges v. Crowinshield, supra.

10. Ogden v. Saunders, supra.

The present law after providing for priority among various classes of debtors, then adds that debtors who have priority by the laws of the state shall have priority under the act; that a debtor shall be allowed the exemptions allowed by the law of his state; that liens good by the law of a state not acquired by judicial proceedings within four months shall be good in bankruptcy; and so on. It is readily seen that under the bankruptcy law a debtor of one state may have larger rights than a debtor of another because of the greater liberality of exemption laws; that a creditor may have greater rights in one state than in another, because of the difference in lien and priority laws. But it would be highly unfortunate if Congress could not recognize local conditions. It has been held that a bankruptcy law does not lack uniformity on these grounds, and that the act of 1898, is constitutional.13

11. Hanover National Bank v. Moyses, 186 U. S. 181. 12. Idem.

Sec. 5. History Of Bankruptcy Laws In The United States

The various states have enacted insolvency and bankruptcy laws in force when there has been no federal law in force. Congress has passed four bankruptcy laws; and the Act of 1898, with amendments, is in force today.

Not stopping to consider the history of the legislation of the various states upon the subject of bankruptcy, we may notice briefly the history of bankruptcy legislation of the Federal Congress.

(1) Act of 1800, repealed in 1803.

The first bankruptcy act passed by Congress was the act of 1800. It was repealed in 1803. It was limited to traders. It provided for involuntary, but not voluntary bankruptcies. It was an unpopular act, owing largely to the popular distrust of federal legislation.

13. Idem; Stellwegen v. Clum 245 U. S. 605. In the latter case the court said: "Notwithstanding this requirement as to uniformity, the Bankruptcy Acts of Congress may recognize the laws of the State in certain particulars, although such recognition may lead to different results in different states. For example, the Bankruptcy Act recognizes and enforces the laws of the states affecting dower, exemptions, the validity of mortgages, priorities of payment and the like. Such recognition in the application of state laws does not affect the constitutionality of the Bankruptcy Act, though in these particulars the operation of the Act is not alike in all the states."

(2) Act of 1841, repealed in 1843.

This act was confined to traders, bankers, factors, brokers, underwriters and marine insurers. It provided for voluntary as well as involuntary proceedings. It was a law drawn upon modern theories, but was repealed for political reasons.

(3) Act of 1867, repealed in 1878.

The third act of bankruptcy was much longer lived than its predecessors. It provided for voluntary and for involuntary proceedings. It had many defects in it which are attempted to be remedied under the present act.

(4) Act of 1898 (now in force).

Our present law is the act of 1898. It was amended in 1903, 1906 and 1910. It has been the most permanent and the most successful federal bankruptcy law. There is no present indication of its repeal or fundamental change. It is the law to which our attention is particularly devoted throughout this book. Its text is set out in Appendix A.