The imprisonment for indebtedness of such prominent …

Years: 1800 - 1800
The imprisonment for indebtedness of such prominent American statesmen as James Wilson and Robert Morris finally compels Congress to pass the Bankruptcy Act of 1800, establishing a framework for creditors and debtors to cooperate in reaching a settlement.

Passed in response to a decade of periodic financial crises and commercial failure, it is modeled after English practice.

Only merchants, bankers, and brokers can petition a creditor.

The bankrupt estate is placed under the control of an assignee chosen by the creditors.

The law is meant as a temporary measure with a five-year sunset clause. 

Though critics, who argue that the law encourages risky investments by reducing the cost of failure, will prevent its renewal in 1803, the act represents a step in the American legal tradition against imprisoning debtors.

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