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The social and legal process of bankruptcy in Germany, 1815-1870

By Frederic Jasper Kunstreich

Abstract

<p>The regulation of bankruptcy poses a dilemma to societies. It needs to address two problems at once: the first concerns the balance between debtor and creditor interests; the second pertains to the question between deterrence and continuity. Up to the present day there is much disagreement about the appropriate design of bankruptcy procedures. German states in the nineteenth-century found it impossible to agree on a common insolvency regime until the 1870s. This thesis investigates the legal as well as the social process of bankruptcy in a sample of towns and states in Germany between 1815 and 1870. It focused on non-Prussian legal systems in order to shed light on those alternative solutions to bankruptcy that were not ultimately adopted in the national bankruptcy code. </p> <p>Bankruptcy was a social process that could take place in court as well as out of court. Creditors and debtors had strong incentives to turn to extrajudicial settlement mechanisms. Where strong local corporate organisations for merchants existed, they facilitated settlements and rule-enforcement among its members out of the official court system. Those local clubs often played the role of an arbitrator. For long, bankruptcy regulation had been part of the mercantile self-administration. Legal harmonization and processes of state formation put an end to these practises. Simultaneously, an industrializing economy devised new organisational forms that were alien to the old legal framework. Toward the second half of the century, legal harmonization gained momentum; creditor protection became the focus of lawmakers while local communities and their interests no longer played a role. As German legislators built a national and universally shared legal framework, bankruptcy regulation ceased to be local and communal. This was to the liking of businessmen, who had long complained about legal fragmentation when trying to conduct business across different German regions.</p

Topics: Legal History, Economic history, Bankruptcy, State Formation, Hamburg, Insolvency, Institutions, Economics, Germany, History
Year: 2017
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