Asian Journal- The Filipino-American Community Newspaper

WHAT are debtor prisons? These are prisons for debtors who cannot pay their debt. Dubai still has debtor prisons at this time. That is why expats in Dubai who lose their jobs make a hasty departure from the country as soon as they are terminated. There are thousands of cars left in the Dubai airport as a testament to foreigners who have left when they can no longer pay their bills. England had debtor prisons up to the 19th century. In fact, Charles Dickens wrote a book called ‘Little Dorrit,’ about a girl who actually grew up in a debtor prison with her father who could not pay his debts. Even in America, there were debtor prisons up to the 19th century. Fortunately for us, the United States Constitution itself, the supreme law of America, empowered the Congress of the United States to enact bankruptcy law, instead of perpetuating debtor prisons forever.

Article One Section 8, of the US Constitution defines Congress as the legislative branch of the federal government. Section 8 specifically states that ‘Congress shall have power …to establish uniform laws on the subject of Bankruptcies throughout the United States.’ The Constitution was adopted on September 17, 1787 by the constitutional convention in Philadelphia, Pennsylvania. Thereafter, it was ratified in each US State. The Constitution is the foundation and source of the legal authority underlying the existence of the United States and federal government of the United States. It has seven original articles and 27 amendments. The power of Congress to enact bankruptcy law is specifically provided in the first article of the Constitution. Thus, our founding fathers must have envisioned that having debtor prisons was a bad idea even though the morality at the time equated the inability to pay debt as a ‘sin’ against the Almighty requiring destitute debtors to be incarcerated until their debt was paid. Creditors had the power to let debtors out of jail so they could seek employment to pay back money owed. Wage garnishments are slaps on the wrist compared to incarceration. We are lucky that we do not live in Dubai. Otherwise, LAX would be filled with cars left by H 1 B workers who have been terminated. And where do we imprison the millions of American citizens who have lost their employment in this recession? Should we also put Gov. Swarzenegger behind bars because California is bankrupt and cannot pay its bills? The wisdom of our founding fathers in paving the way to eliminating debtor prisons is apparent in their foresight. Commerce was expanding geometrically, and expansion requires financing. It was inevitable with the changing times that commercial enterprises would get bankrupt. After all, business risks can yield profit, or could lead to bankruptcy. If debtor prisons were not eventually eliminated, America could not build enough prisons to hold all business owners who went bankrupt. Maybe the constitutional delegates themselves owed money that they could not pay back. None of them wanted to go to prison for unpaid debt.

Hence, American debtor prisons were eliminated and replaced by bankruptcy law. Initially, bankruptcy law applied only to commercial endeavors. Entrepreneurs were encouraged to raise capital, borrow money and take risks to expand the economy and create employment. If the business enterprise failed, it could declare it bankrupt. The owners of the failed business do not have to go to debtor prisons. To illustrate, Henry Ford, the founder of Ford Motor Company failed in his initial attempts and declared bankruptcy. But eventually succeeded to build the Ford Motor company into the largest car manufacturer in the world at that time and continues to be a successful business conglomerate today. Walt Disney, the founder of Mickey Mouse and Disneyland, failed in his initial attempts and declared bankruptcy but eventually succeeded beyond his wildest dreams. If both of them were put in prison, then the world would not have experienced Ford and Disney products.

Thus, Bankruptcy is a good thing. It’s way better than debtor prisons. Bankruptcy makes you productive again.

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Lawrence Bautista Yang specializes in bankruptcy, business, real estate and civil litigation and has successfully represented more than five thousand clients in California. Please call Angie, Barbara or Jess at (626) 284-1142 for an appointment at 1000 S. Fremont Ave., Bldg. A-1 Suite 1125 Unit 58, Alhambra, CA 91803.