Bankruptcy was a legal tool people and businesses could use to hit the financial “reset” button, even back in 1842 when the famous macabre writer Edgar Allen Poe filed for bankrupcty. Although Michael F. Kanzer & Associates wasn’t around back in the 1800s, our Brooklyn bankruptcy law office sees its fair share of bankruptcy cases and can attest that debt crises are among the most stressful situations individuals may encounter in their lives.
Poe was living in Pennsylvania at the time and filed the petition under the federal Bankruptcy Act of 1841, which according to the Federal Judicial Center, the Act granted district courts “jurisdiction in all matters and proceedings in
bankruptcy,” including developing rules for proceedings and appointing bankruptcy commissioners and assignees.
In addition, the Act
– allows voluntary cases
– extends relief to all debtors allows discharge of debtors who turn over assets
– provides for recovery of fraudulent transfers and preferences
– prohibits debtors from using state law exemptions
Poe appended a long list of debts and creditors, located in the areas in which Poe lived throughout that decade: Philadelphia, Richmond, and New York. The writer’s extensive catalog of debtors ranged from doctors, to music teachers, to individuals from whom Poe borrowed money. Poe’s petition was finally granted in January 1843.
The 1841 Act was created to address the fallout from the Panic of 1837- when real estate and banking went belly-up and wreaked havoc on the economy. Poe had a hard go of it then too, since the poor economy caused numerous magazines to shutter.Individuals and merchants were allowed to file voluntary petitions for bankruptcy as a result of the act, which they took advantage of in the short time the Act was in action. More than 33,000 petitions were filed before the Act was repealed. The 1841 act opened the door to voluntary petitions of bankruptcy, and many Americans (both individuals and merchants) took advantage of it. Thirty-three thousand cases were filed under its auspices before it was repealed.
It was another 15 or so years before the next bankruptcy law was introduced. In 1867, Congress passed a statute that included “the collection of all the assets of the bankrupt” as part of its grant of jurisdiction over “proceedings in bankruptcy.”