Reconstructing the Bankruptcy Power: An Originalist Approach.

• Author: Simmons, Joseph E.

INTRODUCTION

From the New Deal through the turn of the twenty-first century, congressional deliberations about bankruptcy reform followed a familiar pattern. Creditor lobbyists pushed for amendments requiring at least some debtors to complete multiyear partial repayment plans before receiving the debt-forgiving "bankruptcy discharge." (1) Bankruptcy professionals and progressive scholars countered that such requirements were "alien to our jurisprudence," (2) akin to "involuntary servitude," (3) and "inconsistent with the policy and traditions of a country which has abolished involuntary servitude by the Thirteenth Amendment." (4) Time after time, Congress sided with the latter, sometimes on explicitly constitutional grounds. (5)

Then came the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). (6) Despite a moderately sized literature articulating the Thirteenth Amendment case against it, (7) Congress adopted a means-testing requirement: bankruptcies filed by debtors whose income fell above a certain threshold could be converted from Chapter 7 (immediate discharge) to Chapter 11 or 13 (conditional discharge, requiring completion of a repayment plan). (8) Debtors have occasionally argued that this conversion is unconstitutional, but courts are highly skeptical. (9)

The basic problem that courts have with debtors' constitutional arguments is that bankruptcy courts never actually compel any labor. Repayment plans are involuntary only in a conditional sense: the debtor must complete the repayment plan if and only if she is to receive a debt discharge. (10) As one bankruptcy court tersely explained, so long as "a party has no constitutional right to a discharge of its debts" then "[r]efusing to allow the [djebtor a discharge under Chapter 7 is not involuntary servitude." (11) And the Supreme Court rejected a constitutional right to a bankruptcy discharge in United States v. Kras, concluding that a bankruptcy discharge was "obviously ... a legislatively created benefit." (12) Following the courts' reasoning, the Thirteenth Amendment no more prohibits conditioning the bankruptcy discharge on future labor than it prohibits conditioning unemployment benefits on a search for employment. (13) Or--the specific issue in Kras--conditioning access to bankruptcy on payment of filing fees. Or--as in the present Bankruptcy Code--conditioning discharge on completion of a financial literacy course (14) or prohibiting discharge of certain kinds of debt, such as student loans. (15)

But is it really "obvious[]" (16) that the bankruptcy discharge--what bankruptcy jurisprudence for well over a century has referred to as the "fresh start" (17)--is merely a legislative creation? Unlike many federal programs, bankruptcy law finds its constitutional grounding not in the Commerce Clause or the Spending Clause, but in a specially tailored congressional power "[t]o establish... uniform Laws on the subject of Bankruptcies." (18) Any law enacted under the authority of the Bankruptcy Clause must possess the features of a bankruptcy law, making it a constitutional question what those features are. The argument of this Note is that, ever since the Thirteenth Amendment, a law cannot be a bankruptcy law in the constitutional sense without making adequate provision for access to a fresh start by honest unfortunate debtors. This argument somewhat resembles that made by earlier commentators who intuited a kinship between denying a fresh start and imposing involuntary servitude. But its legal logic is quite different: it does not find in the Thirteenth Amendment an external constraint on bankruptcy law, but rather an essential alteration to it.

To assert such an essential alteration may sound quixotic. If the bankruptcy power really had been "reconstructed" in this way by the Thirteenth Amendment, surely someone would have noticed. But while the Thirteenth Amendment connection is novel, commentators have long recognized that bankruptcy law changed dramatically in the final third of the nineteenth century. (19) In 1789, "the subject of Bankruptcies" encompassed only collective-creditor remedies against merchant debtors, (20) and the first federal bankruptcy law confined itself accordingly. (21) A century later, bankruptcy laws had begun to do much more. (22) By 1935, the Supreme Court was prepared to hold that the New Deal bankruptcy laws, "far-reaching though they be, have not gone beyond the limit of congressional power; but rather have constituted extensions into a field whose boundaries may not yet be fully revealed." (23) In practice, the field seems to have no boundaries at all, with the scope of the bankruptcy power being determined entirely by the scope of Congress's desire to legislate. (24) The expanding-field theory is convenient for legitimating congressional enactments, but useless for constraining its agenda when it has been coopted by private interests. (23) A return to the bankruptcy power of 1789, on the other hand, would require a radical rejection of much of the modern bankruptcy system. This Note offers an alternative preferable to both: it accounts for how the bankruptcy power has changed since 1789, while attributing that change to a constitutional amendment rather than Congress's imagination.

This Note proceeds in five Parts. Part I describes this Note's approach to constitutional interpretation, construction, and reconstruction. Part II identifies a narrow and a broad reading of "the subject of Bankruptcies," both of which were linguistically possible in 1789. Part III demonstrates that the narrow reading is the most plausible construction of the bankruptcy power under the original Constitution and tended to be recognized as the appropriate construction throughout the first half of the nineteenth century. Part IV argues that the Thirteenth Amendment's prohibition on involuntary servitude required a reconstruction of the bankruptcy power, such that bankruptcy law today is necessarily concerned with the servitude inherent in insolvency. And Part V surveys the implications of this reconstruction for bankruptcy law today. A brief Conclusion follows.

1. INTERPRETATION, CONSTRUCTION, RECONSTRUCTION

   This Note begins with a problem: how can an interpreter give legal effect to the Bankruptcy Clause in a way that makes sense of modern bankruptcy law, while placing real limits on Congress's power to deny a fresh start? As a solution, it proposes identifying an inflection point in the history of bankruptcy law coinciding with the ratification of the Thirteenth Amendment. Accordingly, this Note should be of interest to anyone interested in the scope of the bankruptcy power, and willing to entertain the possibility that its history might be a resource for delimiting it. Neither requires a general methodological commitment to original intent, (26) original public meaning, (27) or original law. (28) Alternatively, or additionally, such interest might be motivated by concern about interest-group capture (29) and such willingness by a recognition that the Bankruptcy Clause is not one of the Constitution's "majestic generalities," (30) but rather a grant of power regarding an esoteric procedure mostly of little interest to those who have not yet found themselves caught up in it."

   Again, my start and end points do not require any deep familiarity with originalist theory. The route I chart between them, however, does make use of originalist methods. While originalists may be able to adopt its argument wholesale, nonoriginalists may find its angle of approach alien and its terminology offputting. This need not prevent them from adapting its argument to their own framework, but it does pose difficulties. In this Part, I seek to alleviate these difficulties somewhat by describing this Note's originalist methodology. I begin with a distinction increasingly (though not universally) (32) accepted among originalists: that between interpretation and construction.

   According to the exponents of this distinction, all constitutional theories - not just originalism--engage in both interpretation and construction. In Lawrence B. Solum's influential formulation, interpretation "recognizes or discovers the linguistic meaning or semantic content of the legal text," while construction "gives a text legal effect (either [b]y translating the linguistic meaning into legal doctrine or by applying or implementing the text)." (13) For interpretation to be originalist, it must be an empirical exercise in historical linguistics. Such an exercise can usually clarify which meaning of an ambiguous word is relevant to a legal text, but little more. Construction, meanwhile, is required to resolve vagueness within a provision or conflicts or gaps between two provisions. (34) For construction to be originalist, it must construct a provision's legal effect by applying a background law of construction that was itself constructed according to originalist principles. Much recent originalist theory, particularly that of William Baude and Stephen E. Sachs, has been dedicated to showing what this construction looks like. (35) 1 would summarize their work as follows: interpretation identifies the affordances of a constitutional provision, that is, what could be done with it, by looking to original semantic content; construction determines what our Constitution actually does with it, by use of legal arguments that would have made sense at the time of enactment. Thus, construction calls for an inquiry that is not empirical. Rather, construction is fundamentally a matter of weighing legal arguments.

   The interpretation/construction distinction is complicated by the phenomenon of constitutional amendment, which a skeptic might argue makes any historical argument concerning construction irrelevant; all that we should care about is how one would best construct the legal effect of the Constitution when it was last amended in 1992. This skeptical difficulty can...