By Professor Rafael I. Pardo, Robert T. Thompson Professor of Law, Emory Law (Atlanta, GA)

Summary/Commentary

By Phil Lamos, Chief Legal Counsel, Office of the Chapter 13 Trustee Lauren A. Helbling (Cleveland, OH)

Slavery and Bankruptcy in America – Summary

Professor Rafael Pardo has written an extensive and fascinating article to be published in an upcoming Vanderbilt Law Review. He has given us a sneak peek.

Professor Pardo specializes in bankruptcy and commercial law, is an elected member of the American Law Institute and has testified as a bankruptcy expert before both houses of Congress.  In 2015, he received the Emory Williams Distinguished Teaching Award, the highest university honor for teaching given by Emory University to a full-time faculty member in recognition of a record of excellence in teaching.

Slavery and Bankruptcy in America discusses the passage by Congress of the Bankruptcy Act of 1841 which was a momentous occasion in the nation’s Bankruptcy history. The Bankruptcy Act of 1841 was one of the earliest attempts by Congress to regulate and legislate the Bankruptcy process, and it was the first piece of Bankruptcy legislation which allowed individuals to seek bankruptcy relief voluntarily, rather than having it forced upon them by their creditors. Important as this piece of legislations was, it led to one of the darkest periods in the nation’s Bankruptcy history. For a brief period of time in the middle of the nineteenth century, the federal district courts of this country, as part of their jurisdiction over the Bankruptcy process, managed and oversaw the sale of slaves.

Under the Bankruptcy Act of 1841, if a jury found that a debtor was entitled to bankruptcy relief, the Court would issue an order requiring the U.S. Marshalls to gather all of the debtor’s nonexempt assets and deliver them to a court-appointed receiver. This court-appointed receiver would sell the assets with the proceeds going to the bankrupt’s creditors. As we are painfully aware, in the South before the Civil War, one such possible asset would have been a debtor’s slave holdings. Court-administered slave sales took place from New Orleans to Richmond, with thousands of slaves being sold in court-administered liquidations arising in cases filed between 1841 and the repeal of the Act in 1843. Slaves who had been seized by the U.S. Marshall were jailed until they could be sold. The standard Bankruptcy forms and schedules of the time had a place for a debtor to list slave holdings, and even the rights to recapture slaves who had run away and could not be located were subject to auction.

Per Professor Pardo’s research, and history as we know it, slavery was an entrenched part of the antebellum South’s financial and cultural structure.

Professor Pardo’s article concludes that we must never forget that the 1841 Act, the forbearer of modern bankruptcy law, caused great harm and suffering to bankrupt slaves.

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Doing the Unpleasant Parts of the Job – Commentary

Reading this article, makes one wonder if someone, somewhere charged with conducting and/or administering these bankruptcy cases found the sale of human beings abhorrent? Yet the sales went forward.

In today’s bankruptcy courts, of course, no one sells human beings. But how do we do the things that are a necessary component of our jobs, but that we find repulsive? Maybe what we find repulsive is something that we can all agree is difficult, like moving to dismiss the case of the sweet old lady who hasn’t made a plan payment in six months or objecting to a motion for a hardship discharge filed by a deserving debtor who hasn’t yet paid as much to their unsecured creditors as they would have received in a Chapter 7. Perhaps it is something on which seemingly reasonable minds may disagree, like the administration of cases filed by same-sex married couples.

One could say that we do these things because we’re paid to do them, but I think we’re more sophisticated than that. Unlike the selling of humans, I think we do them because we all recognize that doing these distasteful tasks serve a purpose larger than any one particular case. We are the protectors of the Bankruptcy system, and protecting the integrity of the system sometimes means doing things that we might find repugnant or hard to swallow. We have responsibilities to all parties involved, creditors as well as debtors, and while our heart might bleed for the sweet old lady, we have obligations to the creditors as well and it’s not within our purview to favor one over the other. Allowing the sweet old lady who’s not paying to stay under the protection of the Bankruptcy Code is not fair to the debtors who are paying (and it drives up costs for all debtors as well), so honoring our responsibilities to the system as a whole requires us to move to dismiss the cases which are failing, no matter our feelings. Giving a break to (or punishing) someone because of our particular ethics makes it okay for someone else to give a break to (or punish) someone because of their particular ethics, and eventually rules and laws have no meaning.

Sometimes our jobs are not easy. Sometimes we are forced to do things that we might think are repellant. But as odious as we might find these tasks, the only way the Bankruptcy process succeeds for all parties involved is if we carry these tasks out fairly and efficiently.

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Professor Rafael Pardo specializes in bankruptcy and commercial law, and his scholarship has been published in numerous law journals, including the Alabama Law Review, the Iowa Law Review, the Florida Law Review, the UCLA Law Review, the Vanderbilt Law Review, the Washington Law Review, the Washington and Lee Law Review, and the William and Mary Law Review.

Professor Pardo received his JD from New York University School of Law, where he served as an executive editor of the New York University Law Review and was a recipient of the Judge John J. Galgay Fellowship in Bankruptcy and Reorganization Law.  He is an elected member of the American Law Institute and has testified as a bankruptcy expert before both houses of Congress.  In 2015, he received the Emory Williams Distinguished Teaching Award, the highest university honor for teaching given by Emory University to a full-time faculty member in recognition of a record of excellence in teaching.

Education: JD, New York University School of Law; BA, Yale College

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Phil Lamos has been an attorney for the Chapter 13 Trustee since 1997, and has been the Trustee’s Chief Legal Counsel since 2003. A graduate of John Carroll University and the Cleveland-Marshall College of Law, Phil lives in Painesville, Ohio with his wife, son, and daughter.