A Brief History Of: Bankruptcy

Seth Wenig / AP

Hoping for a fresh beginning, debtors and creditors line up at a bankruptcy court in New York City.

With apologies to Apple Pie, bankruptcy is as American as it gets. From the earliest days of the Republic to General Motors' June 1 filing for Chapter 11, debt relief has been at the center of a tug-of-war between competing Yankee principles: reinvention and responsibility.

In Colonial America--where moneylending was governed as much by moral codes as by legal ones--defaulting on your debts was considered a moral failing. Accordingly, owing as little as 40 shillings (less than the price of a fine pair of bedsheets) could get you thrown into a Dickensian debtors' prison. Amid the financial turmoil that followed the...

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