Eighteenth century bankruptcy law : From crime to process

During the 18th and early 19th centuries there was a vast change in the primary social function and in the meaning of the legal norm of bankruptcy law. With the growth of a depersonalised trading comity whose members increasingly required an efficient means of clearing bad debts, bankruptcy changed from being a means of policing trade to being a process for debt-collection. The objectives are to explain how it was possible for judiciary and merchants to hold conflicting views of the proper end of bankruptcy law; and to explain how and why the legislature and the judiciary eventually proved responsive to the expectations and requirements of merchants over this vital aspect of the law relating to trade. To these ends, Kuhn's theory of 'paradigm shift through crisis' is employed to explain the development of legal, as opposed to scientific knowledge. A 'relative autonomy' is established for 18th century bankruptcy law, judges being more concerned with maintaining the law's 'internal consistency' than with satisfying merchants' needs. By the late 18th century, the distance between what judges could offer, and what merchants required of bankruptcy, had become intolerable to the new impersonal trading community. The merchants' praxis for reform, the 'moral panics' of swindling and sham (friendly bankruptcies, and the accelerating bankruptcy rate, led to a crisis in the judicial paradigm of bankruptcy as crime that was only resolved by legislation in 1824/5. Thus, the emerging possibility of self-declaration of bankruptcy established the new paradigm of bankruptcy as process. The legal changes required and fought for by business accompanying the shift from personalised and honour-bound trading communities to a political economy based upon economic efficiency, and characterised by transactions between strangers, were achieved despite rather than because of judicial activity. Judges were motivated predominantly by the need to maintain the structural integrity of fields of legal discourse.