What Does The Constitution Say About Bankruptcy?
by Ben Sheehan
September 13, 2020
This interview with Ben Sheehan, author of the new book “OMG WTF Does the Constitution Actually Say?” was conducted and condensed by franknews.
What does the Constitution say about bankruptcy?
The Constitution mentions bankruptcy in Article One, Section Eight. It says that Congress has the power to establish uniform bankruptcy laws throughout the U.S., including bankruptcy courts.
This is why bankruptcy courts are referred to as ‘Article One’ courts. This is different from ‘Article Three’ courts -- which are mainly district courts and circuit courts -- and both of which can appeal to the Supreme Court. However, Article Three courts mainly handle cases around treaties, federal laws, and the Constitution. There are currently 90 bankruptcy courts, about one per federal district, and each court has its own judge.
The point is that Congress has the exclusive power to handle bankruptcies. State law doesn't have the right to handle bankruptcies -- it's purely under federal discretion, per the Constitution.
There is a bit of dispute around whether you have a constitutional right to bankruptcy as an individual because the Constitution specifically references Congress. However, Congress makes the bankruptcy laws, and their laws say you have a right to declare bankruptcy. So, you have a legal right, but not necessarily a constitutional right.
What is the process for something like student debt cancellation or forgiveness?
The decision to cancel student debt would be through Congress. They can make any laws around bankruptcy they want. There's been a number of federal bankruptcy laws, but the big one was 1978. That's the bankruptcy code that gave us Chapter 11.
It's weird because bankruptcy is just mentioned in passing in the Constitution, as one of Congress's powers, not unlike how Congress has the power to establish post offices and post roads, per a fleeting constitutional mention.
But when you have a Congress that's so divided and inactive, you're screwed when it comes to making policy changes especially if the power to shape that policy is exclusive to Congress. These days, it feels like Congress is mostly partisan gamesmanship, with representatives and senators trying to get viral gotcha videos on committee.
I just don’t think we’re getting anywhere, and I think the founders would be appalled by the performative nature of our modern-day Congress.