Bankruptcy in Russia, 1740-1800, and the First Non-Merchant Discharge!
I discovered something surprising in my summer research on the history of bankruptcy in Russia: It seems that the first modern, court-ordered bankruptcy discharge available to non-merchant debtors appeared not in the US or England, but Russia, in 1800. I suspect the relief offered was largely theoretical, but I found it shocking and intriguing that a discharge appeared in Imperial Russian law that early on. The law will finally come full circle in October 2015, when the new Russian law on personal insolvency becomes effective. It's been a long time coming!
As in England, bankruptcy law in Russia started from a much more hostile and punitive position toward debtors. In the Charter on Bankrupts of 15 December 1740 (law no. 8300, available online here), debtors who fell into distress through no fault of their own were to be released from debtor's prison and not fined (s. 19), while debtors whose fault contributed to their downfall (e.g., by continuing to trade while insolvent) were to be fined and executed by hanging (ss. 31-32). Luckily for debtors, this law was apparently ignored in practice and was replaced in 1753 with a new law (without a death penalty) by Peter the Great's daughter, Elizabeth.
A more radical departure from past practice appeared in the landmark Charter on Bankrupts of 19 December 1800 (law no. 19,692, available online here). This law for the first time drew a distinction between merchant and non-merchant debtors, making bankruptcy relief available to the latter in a distinct Part Two.
The substantial extent of borrowing and lending in mid-19th century Russia, and the particulars of both the bankruptcy process (for merchants) and the much more humane conditions of Russian debtor's prison, are described (in English!) in a magnificent Columbia Univ. dissertation by Sergei Antonov, entitled Law and the Culture of Debt in Moscow on the Eve of the Great Reforms, 1850-1870. For enthusiasts of both Russian history generally and economic/bankruptcy history in particular, this work is a rare and valuable find--and quite an engaging read.
I believe there was a 9 month period in the 1750s in the Massachusetts Bay Colony where they had a statute that allowed for a discharge, and I believe some were granted. I do not, however, know if it was limited to merchants.
Posted by: Alan | July 24, 2015 at 09:26 AM
I'm fairly confident the American colonial insolvent laws didn't go as far as the Russian law, as the former were modeled on the (otherwise applicable) English law, and the later (state of) Massachusetts insolvent law required a vote of creditors (or a 50% dividend) to discharge the debtor. Stephen Lubben offers a nice discussion of some of the early history here: http://law.case.edu/journals/lawreview/Documents/DigitalPrint.2.Lubben.V64.Issue2.pdf.
Posted by: Jason Kilborn | July 24, 2015 at 09:47 AM