Bankruptcy Fraud: Crime without Punishment II
![handle is hein.journals/clla102 and id is 7 raw text is: BANKRUPTCY FRAUD: CRIME
WITHOUT PUNISHMENT II
RALPH C. MCCULLOUGH, II*
Realistically, commerce has always found debtors who, whether
through improvidence, mismanagement or ill fortune, have reached
a depth of insolvency from which they have no hope of extricating
themselves.' The oldest bankruptcy laws emerged as weapons for
creditors to prevent the flight of such debtors and to recover what
assets might remain.2 More recently, legislatures have crafted bank-
ruptcy statutes favoring cooperative action whereby debtors may
work with creditors to realize the best return possible under the cir-
cumstances.3 In return for their cooperation, debtors receive a dis-
charge of their debts and a fresh start.'4 Those who do not
* The author is the Chair Professor of Advocacy at the University of South
Carolina School of Law. He is also of counsel to the Columbia, South Carolina law firm
of Finkel Altman & Bailey, L.L.C.
1. See generally Causes of Bankruptcy, ch. 2, Report of the Commission on the
Bankruptcy Laws of the United States, H.R. Doc. No. 137, 93d Cong., 1st Sess. pt. 1
[hereinafter Commission Report], reprinted in Appendix 2, COLLIER ON BANKRUPTCY,
33-59 (Lawrence P. King et al. eds., 15th ed. 1979).
2. See REMINGTON ON BANKRUPTCY § 7 et seq. (J. Henderson, 5th ed. 1950); and
Commission Report, supra note 2, ch. 3 B.I., The perspectives from the History of
Bankruptcy Legislation. See also L. Vener, Transfers in Fraud of Creditors under the
Uniform Acts and the Bankruptcy Code, 92 COM. L.J. 218 (1987) (illustrating the
common-law roots of acts against fraudulent conveyances from Magna Carta on).
3. For example, in the current Bankruptcy Code, see A Philosophical Basis for a
Federal Bankruptcy Act, ch. 3, Commission Report. Note that the Bankruptcy Code has
not, however, abandoned the interests of the creditor in providing for rehabilitation of the
debtor: This is not primarily a debtor's bill, however. Report of the Committee on the
Judiciary, House of Representatives, to Accompany H.R. 8200, H.R. REP. No. 95-595,
95th Cong., 1st Sess. 4 (1977), reprinted in Appendix 2, COLLIER ON BANKRUPTCY
(Lawrence P. King et al. eds., 15th ed. 1984).
4. See, e.g., In re May, 12 B.R. 618, 621 (N.D. Fla. 1980) (The primary purpose of
bankruptcy statutes is collection and distribution of the debtor's estate to his creditors.
The discharge of the bankrupt is a secondary purpose designed to give the honest debtor
the opportunity to reinstate himself in the business world; it is not intended to be
available to a dishonest debtor.). See also Jennen v. Hunter (In re) Hunter, 771 F.2d
1126 (8th Cir. 1985) (indictaing that the discharge is available only to honest debtors; in
case of dishonesty, debtor is no longer entitled to the benefit .of debtor rehabilitation
considerations,) (quoting In re Wilson, 12 B.R. 363, 370 (Bankr. M.D. Tenn. 1981)). For](ViewImageLocal?handle=hein.journals/clla102&div=6&collection=&method=preview&ext=.png&size=3)
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Bankruptcy Fraud: Crime without Punishment II
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