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LAWS FOR DEALING WITH THOSE FAILING TO PAY HAVE LONG HISTORY

The idea of bankruptcy as a humane way to help people out of debt goes back to the Bible. But history shows these biblical teachings took a long time reaching some countries.

A few English debtors were hanged after Parliament passed the first bankruptcy act in 1705. Creditors also were allowed to nail a debtor's ear to a post for two hours and then slice it off for failing to pay up.

Creditors in ancient Rome would make modern-day bill collectors and their dunning phone calls look wimpy. Romans were allowed by law to hack up and divide the bodies of deadbeats. The system allowed creditors to vent their anger, but obviously removed any possibility of getting paid.

For better or worse, framers of the American Constitution chose the bankruptcy system. The system is far more liberal than those in Europe. Americans can erase much more debt, but many European countries offer a greater network of social services.

Bankruptcy supporters like James Wooten, associate law professor at the University at Buffalo, said the U.S. system helps millions of honest Americans get back on their feet after job layoffs, illnesses, or other catastrophes.

He contends the number of people who cheat or abuse the system is relatively small.

"Certainly, there are horror stories," Wooten said. "But there are lots of cases when people are down on their luck. What are we going to do with these people? It seems like the United States is a country where people get new starts."

Some of the nation's founders knew a lot about debt.

Robert Morris, the chief financier of the American Revolution, signed the Declaration of Independence, helped write the Constitution and served in the U.S. Senate.

All that meant nothing when bad land investments left him unable to pay his debts. He spent three years in debtors prison.

James Wilson also signed the Declaration, wrote key provisions of the Constitution and spent nine years as a Supreme Court justice. He made the same bad land deals and fled Pennsylvania a step ahead of his creditors to avoid debtors prison.

The nation's founders decided bankruptcy was a better way. As an alternative to debtors prisons, bankruptcy protection was included in the U.S. Constitution.

The provisions were intended to allow honest debtors to write off most or all their debts and get a fresh start.

The founders may not have envisioned what has happened in the 1990s, an era where more than a million Americans are in bankruptcy and some millionaires are using the bankruptcy courts to escape paying business debts.

Elizabeth Warren, a Harvard law professor who serves on a national commission studying bankruptcy laws, says feelings about the concept always will be mixed.

"The fresh start for debtors, a chance for a person in financial collapse to begin anew, is an appealing idea -- until one confronts the inevitable fact that it permits people to walk away from their obligations and to break their promises," Ms. Warren wrote in "As We Forgive Our Debtors."

Celebrity bankruptcies get the most attention. Household names like Wayne Newton, Burt Reynolds, Kim Basinger and former Buffalo Bills quarterback Jim Kelly have filed to avoid paying bills for failed business ventures.

But the evidence shows the well-to-do are a fraction of those people streaming into bankruptcy courts across the country.

Study after study, including a look by The Buffalo News at 324 cases filed here in May, show bankruptcy court continues to be a place where low- to middle-income people go when they are overwhelmed by debt, when they no longer can pay their bills.

Although the bankruptcy was in the U.S. Constitution, Congress did not write this country's first formal bankruptcy law until 1898.

If Americans got a late start, they seem to have made up for it in recent years.

Slightly more than a half-million Americans -- 530,436 -- filed for bankruptcy in 1986. Last year, the number hit 1 million for the first time when 1,178,000 petitions were filed, 95 percent by individuals, not businesses.

And every three months, another record is set as the government releases new quarterly figures. This year's filings should hit 1.3 million.

Many bankers and business leaders contend filing for bankruptcy has become too easy. The National Bankruptcy Review Commission, expected to issue its findings this month, is looking at possible revisions in bankruptcy laws.

"While the evidence clearly indicates that most bankrupt debtors are in serious financial trouble, the respectability of the system depends on careful investiga-tion of possible abuses," the commission wrote last year.

Some changes are expected, but experts say the review commission probably will do no more than tinker or fine-tune the system.

And some people will continue to be down on their luck.

"The question is," said UB professor Wooten, "what do we do?"

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