The 1898 bankruptcy act was debtor-favorable and proved permanent

Evidence

The Panic of 1893 lent arguments to both sides. Debate in Congress was sharp and prolonged. On the whole, Democrats sided with debtors and opposed the law; Republicans were pro-​creditor and favored the law. Finally, in 1898, the law was passed: “to establish a uniform system of bankruptcy throughout the United States.” This act was long, detailed, carefully drawn. Under the law (sec. 4a), “any person who owes debts, except a corporation,” was “entitled to the benefits of this Act as a voluntary bankrupt.” Involuntary bankruptcy could not be forced upon “a wage-​earner or a person engaged chiefly in farming or the tillage of the soil” (sec. 4b). The act did not disturb state exemptions “in force at the time of the filing of the petition” in the state of the bankrupt’s domicile (sec. 6). The law granted special priority, over other debts, to “wages due to workmen, clerks, or servants” if “earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant”; the law also recognized priorities granted under state law, though these priorities ranked lower than federal priorities (sec. 64). In the course of passage many compromises were made. The act as it emerged was much more favorable to debtors than the creditors would have wanted. — Lawrence M. Friedman, A History of American Law, 3144

Categorization

• DEFINE: Specifies the 1898 act’s key protections (wage-earners and farmers exempt from involuntary bankruptcy, state exemptions preserved, wage priority) essential to course vocabulary.
• XREF: Fundamental institutional background for the legal-systems course on bankruptcy as uniform national law; contrasts with the prior temporary acts in ch40.