James v. Allen
In James v. Allen, 1 U.S. 188, 1 L. Ed. 93, 1 Dall. 188 (C. P. Phila. Cty. 1786), a pre-Constitutional Convention court limited the reach of bankruptcy laws from one jurisdiction to another.
Jared Ingersoll, an attorney who a year later would become a delegate to the Philadelphia Convention, represented a Pennsylvania creditor seeking recovery from a debtor who had been released from prison in New Jersey. Shortly after his release, the debtor traveled to Pennsylvania, where he was arrested for nonpayment of the Pennsylvania debt. In seeking release from the Pennsylvania prison, he argued that his debt had been discharged by the New Jersey court.
Ingersoll responded that the order granting relief under New Jersey's insolvency laws "only discharged the person of the debtor from arrest within the State of New Jersey." Id. at 190, 1 U.S. 188, 1 L. Ed. 93. The court agreed: Whatever effect the order might have had in New Jersey, the court said, it "goes no further than to discharge [the debtor] from his imprisonment in the Gaol of Essex County in the State of New Jersey; which, if the fullest obedience were paid to it, could not authorize a subsequent discharge from imprisonment in another Gaol, in another State." Id., at 192, 1 U.S. 188, 1 L. Ed. 93. The court further observed that "insolvent laws subsist in every State in the Union, and are probably all different from each other .... Even the Bankrupt Laws of England, while we were the subjects of that country, were never supposed to extend here, so as to exempt the persons of the Bankrupts from being arrested." Id. at 191, 1 U.S. 188, 1 L. Ed. 93.
This case made it difficult for debtors to travel freely between states, and was an argument that a stronger federal government was needed.
Article 1, Section 8, Clause 4 of the Constitution empowers Congress to enact "uniform Laws on the subject of Bankruptcies throughout the United States". The Congress has enacted statutes governing bankruptcy, which override earlier state laws under the Supremacy Clause.
- Cent. Va. Cmty. College v. Katz, 546 U.S. 356 (2006)