The Bankruptcy Word: “Bankruptcy” – by Matt Knox
New Feature: The Bankruptcy Word looks at the etymology of bankruptcy terms. Matthew Knox is a first year associate in the bankruptcy section of Adair & Myers, PLLC, in Houston, Texas and enjoys learning about the exciting and storied world of bankruptcy. He can be reached at mak@am-law.com.
“Bankruptcy”
Where does the word itself come from? The textbook we used in my bankruptcy class in law school glossed over its origins in a way that hinted at mystery and controversy:
“[W]hether or not ‘bankruptcy’ derives from the Italian banca rotta or ‘broken [merchant's] table’… the clearest origins of United States bankruptcy law are to be found in England.” (The Law of Debtors and Creditors, p. 107, 5th Ed. 2006, by current chair of the Congressional Oversight Panel and two-time Daily Show guest Elizabeth Warren, and Jay Lawrence Westbrook.)
Broken merchant’s table? Wait, what?
The story is that:
“In medieval Europe, a merchant who was unable to pay his bills was dealt with harshly: his creditors would come to the market and break his workbench over his head. Accordingly, the broken bench — banca rota in Latin — is both the legal and linguistic root of modern bankruptcy.” Harvey R. Miller & Chai Y. Waisman, Does Chapter 11 Reorganization Remain a Viable Option for Distressed Businesses for the Twenty-First Century?, 78 Am. Bankr. L.J. 153, 155 (2004).
Sandor E. Schick, on the other hand, takes thorough exception to this old saw in his article Globalization, Bankruptcy and the Myth of the Broken Bench, 80 Am. Bankr. L.J. 219 (Spring 2006). After sifting through the evidence, Mr. Schick concludes this is most likely a myth.
I’d be interested to know the truth because it would be telling either way. Frequently the roots of words and phrases themselves lie in the physical and literal events they came to symbolize, e.g. “deep pockets,” “purse strings.” The myth of the broken trade post leaps off the page, as opposed to the figurative use of the word. But more importantly, if true, a literal broken bench says much about the violent attitudes of punishment and deterrence towards debtors at that time. To this day, many potential debtors can’t help but associate similarly dark visions with the prospect of filing bankruptcy.
But if it is a myth, the perpetuation of that myth also says much about our views on bankruptcy, both now and then.
This association with violence is present in Edgar Lee Master’s poem “Hod Putt” from his 1916 opus, Spoon River Anthology:
Here I lie close to the grave
Of Old Bill Piersol,
Who grew rich trading with the Indians, and who
Afterwards took the bankrupt law
And emerged from it richer than ever.
Myself grown tired of toil and poverty
And beholding how Old Bill and others grew in wealth,
Robbed a traveler one night near Proctor’s Grove,
Killing him unwittingly while doing so,
For the which I was tried and hanged.
That was my way of going into bankruptcy.
Now we who took the bankrupt law in our respective ways
Sleep peacefully side by side.
Before we discuss the poem itself, it should be noted Edgar Lee Masters was an Illinois attorney who practiced with Clarence Darrow defending the poor before he struck it big with Spoon River. As you may recall from high school English, Spoon River was his frequently grim and acrid attack on narrow-minded hypocrisy in small towns.
“Hod Putt” is the first person we meet in Spoon River, the first tombstone after the morbid invocation in “The Hill.” Hod Putt relies on his profound misunderstanding of the “bankrupt law” to rationalize his evil acts of theft and murder. Indeed, he equivocates financial bankruptcy with moral bankruptcy to place himself on the same plane as the rich and presumably savvy Old Bill Piersol.
In “Hod Putt’s” equivocation, we see the same, unfortunate confusion of violence and bankruptcy as we do in the mist-shrouded origins of the word itself. But if Mr. Schick is right about the myth and as “Hod Putt” is so clearly wrong, these confusions should not remain.
Yet they do. Just this morning, a potential debtor asked me if her credit card company got a judgment against her, could she go to debtor’s prison. I assured her that a credit card company cannot compel a debtor’s incarceration on debt alone. Though this is true in the real world, this and other base notions linger in people’s minds when it comes to bankruptcy.
Have a suggestion for a future post of The Bankruptcy Word? E-mail Matt Knox at mak@am-law.com.
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April 1st, 2010 at 3:09 am
The term bankruptcy is actually derived from the ancient word bancus and ruptus, bancus means table or bench and the word ruptus means broken.
Orlando Bankruptcy Lawyer