Reconstructing bankruptcy law in Canada: 1867 to 1919 from an evil to a commercial necessity

In the nineteenth century, Canadian bankruptcy legislation was not widely accepted as a means to distribute assets to creditors or as a way to provide a debtor with a fresh start. In 1880, Parliament repealed the Insolvent Act of 1875 and abandoned its constitutional jurisdiction over bankruptcy and insolvency until 1919.;Much of the debate in the nineteenth century focused on the morality of the discharge and whether it interfered with a debtor's higher obligation to repay debts. Notions of forgiveness competed unsuccessfully with the idea that all debts had to be honoured. The collective nature of bankruptcy proceedings and the distribution of the debtor's assets on an equal basis were also central to the debate. Bankruptcy law's interference with the traditional common law scramble for the debtor's assets affected the specific interests of local and distant creditors. Bankruptcy law represented, therefore, both a conflict of values over the morality of the discharge and a distinct divergence of interests between local and distant creditors over the advantages and disadvantages of a pro rata distribution. This clash of ideas and interests took place within a changing economy that was moving away from its local and rural base. Repeal in 1880 was symbolic of the weakness of the national economy. By 1919, uniform bankruptcy legislation could no longer be delayed in an expanding national market. Credit relationships became less dependent upon matters of character and the bankruptcy discharge became more acceptable as a central feature of the legislation.;Institutional factors such as federalism and the emerging regulatory state also had an independent effect on the legislative history. In the 1870s, the absence of a strong government department and bureaucracy inhibited the implementation of stable and lasting legislation. In 1919, bankruptcy reform coincided with an unprecedented growth of federal regulation during the War. Federalism also affected the timing of the legislation. The ability of the provinces to regulate voluntary assignments and the administration of debtors' estates alleviated the immediate need for federal legislation until after the turn of the century.