Bankruptcy and Conscience

Casuistry is a word with a rather bad connotation in the English language. Its secondary meaning, according to the Century Dictionary, is “ over-subtle and dishonest reasoning.” I am not concerned to deny that there may be good historical grounds for something of the evil reputation which the word possesses. It is apt to be associated in men’s minds with the tortuous reasonings of the Scribes and Pharisees, with their exaggerations of lighter duties and their explaining away of the weightier matters of the law. Their desire to make the yoke of the moral law in certain places more easy for men’s shoulders may also have had its parallel among some Catholic theologians; not every Catholic theologian catches or represents the mind of the Church.

Still, casuistry should not suffer for the sins and errors of some of those who have cultivated the science of conduct. Not all who profess themselves mathematicians or physicists write wisely about those branches of knowledge, and yet mathematics and physics are not held responsible for their vagaries. Neither should the great and useful science of casuistry suffer because some casuists have by their labors endangered the supremacy of the great moral law.

It is difficult to see how any one who admits that there are moral laws or rules of conduct, can reasonably refuse to admit a science of casuistry. Anarchy and confusion would quickly prevail in a country where the interpretation of the laws was left to the judgment or caprice of private citizens. Well-trained and practised intellects are required if law is to be applied with justice, equity, and consistency to particular cases. And so, too, in morals, or the science of right and wrong, the ordinary Christian cannot be expected to apply correctly the rules of Christian conduct to all cases as they arise. He may be able to see, without much difficulty, what the noble, self-sacrificing line of conduct would prescribe in any given case; but that may not be what he is prepared to do. It would doubtless be best if we all on all occasions followed the counsels of perfection, but there is no obligation of so doing, and while human nature remains what it is, there is no likelihood of the attempt being generally made. And so the question constantly arises in daily life— What am I bound to do under these circumstances? What must I do to avoid moral guilt?

Such questions are frequently of great difficulty and intricacy, as every one will acknowledge. The judgment of the expert is not less required to solve them, than it is required to solve the nice points of the civil law. This, then, is what the Catholic moral theologian proposes to himself to do. He tries, by taking the Gospel and the Church as his guides, to draw the line between what is lawful and what is unlawful. He does not take upon himself the office of the preacher, and recommend all to follow the decisions he gives. This he no more thinks of doing than does the judge while sitting in his Court. It is not for him to raise as much as possible the standard of Christian conduct, or to make people better than he found them. He is content with the humbler task of laying down what is forbidden and what is not forbidden, and leaving to others the nobler office of tracing the deeds that are becoming to the generous and the self-sacrificing.

Much of the abuse which has been heaped on Catholic and especially on Jesuit casuistry originated from not considering this scope which moral theologians proposed to themselves, and the point of view from which they regarded questions of morality. Most of the great writers on moral theology have been men of saintly lives, who never dreamed of being content in their own conduct with attaining the standard of morality which they kept before their minds in their writings. There they laid down the principles of right and wrong, discussed real or imaginary cases with all conceivable manner of circumstances in order to illustrate those principles, but they never dreamed of limiting their personal aspirations to the mere avoidance of evil. They well knew that we must aim high to attain even a passable mediocrity in conduct, and in many cases they were men who were not content to aim high, they aspired to and attained a great measure of Christian perfection. As in their own lives, so in their training of others, they did not propose the moral standard of their works on casuistry as the ideal of the Christian life. It was the least that was required, it was the line below which no one who wished to save his soul might sink, though he might rise indefinitely above it, according to the gifts which he had received from God.

And let no one say that such work as the moral theologians of the Catholic Church have set themselves to do is useless or unnecessary. It has always had the encouragement of the Church, though some of the sectaries who broke from her at the time of the Reformation affected to despise and repudiate it. They professed to take as their guide the spirit of the Gospel as interpreted by the individual conscience, and they professed to look down upon the ecclesiastico-legal view of morality as one of the errors of Rome. However, the whirligig of time in this as in so many other departments seems to be proving that the action of the Catholic Church was and is right after all. Good and able men among the non-Catholic religious bodies are realizing the necessity of a sound casuistry as a guide of Christian conduct. Thus in the January number of the Hibbert Journal, in an interesting symposium on the “ Alleged Indifference of Laymen to Religion,” Sir Edward Russell, the well-known editor of the Liverpool Daily Post, writes: —

Is there any obvious disconnection, more conspicuous among Christian than among members of other faiths, between their religion and their practically unavoidable daily lives? The reply is twofold: Firstly, this ought not to be. . . . But, on the other hand, secondly, an uncomfortable, illogical, unintelligent state of conscience is maintained by the growing up of, and acquiescence in, customs of business, practices of speculation, usages when in distant countries, and non-moral rules of peace and war and acquisition—to instance a few examples. Efforts should be made by Christian authorities to formulate and apply ethical Christian dicta in such matters. This would need to be done with great care, and with specially cultivated sound casuistry. But it ought to be done, because ‘‘whatsoever is not of faith is sin,’’ and laymen know they cannot serve two masters. (P. 246.)

This is well put, and justifies in a few words what Catholic moral theologians are constantly striving to perform according to the constantly changing wants of the Catholic clergy and people.

Very little experience within or outside the confessional soon convinces the Catholic priest of the practical necessity of a competent knowledge of casuistry. It is not sufficient for practical purposes to know the general theory of Christian morals. The judgment must have been trained by exercise, so as to be able to apply with accuracy the general doctrines to particular questions as they arise.

Some years ago a friend I had known at college called on me. He held a responsible position in one of the great Manchester places of business. In course of conversation he asked me what I was doing. “ Trying to teach the moral theology of the Catholic Church,” I modestly answered. “Oh!” he replied, “I am often puzzled by questions which I suppose you have to treat of in your official capacity; ” and straightway he proposed a few. The questions were practical cases of conscience arising out of modern business relations, and it may be of interest if I put down here the result of thought and reading bestowed on them and other similar questions. I will deal in this paper with some difficulties arising out of the law of bankruptcy.

John was a younger member of a family that had always tried to cut a figure in the world. The members of the family had been accustomed to live up to the very limit of their means, and John, who was a dashing and handsome young man, after marrying a wife of similar disposition to his own, set up an establishment for himself. John and his wife soon found that it was impossible to make ends meet with their limited resources, and in the space of a very few years they had been adjudicated bankrupt no less than three times. The worthy couple did not trouble themselves much about the matter; the only inconvenience to their mind lay in the fact that they found it more and more difficult to obtain credit. Even this difficulty, however, was to a considerable extent overcome by judicious changes of residence; they found that people who knew them only imperfectly were very confiding in the matter of loans to such an engaging and well-connected couple, and so they had a tolerably merry time of it; in short, they made bankruptcy pay.

It is obvious that John and his wife had been living largely at the expense of their too confiding creditors ; they had been doing wrong in contracting debts which experience taught them there was little probability of their being able to pay, and if they want to lead honest lives they must lower their style of living and try to balance expenditure with income.

A difficulty may arise about the time of declaring one’s self unable to pay one’s debts. It is sometimes possible by borrowing again and by other means to avert threatened bankruptcy for a time at least. Is it lawful to have recourse to such means?

The answer to be given to this question will depend upon circumstances. If there is any reasonable probability of being able to meet the new obligation at the proper time, there need be no scruple about contracting it, and saving one’s self from bankruptcy. If, however, there is no reasonable probability of being able to do this, it becomes a fraudulent contract,— the debtor undertakes to do what he knows he will not be able to fulfil, and so he sins against justice. As to what constitutes a reasonable probability is a question which depends upon the circumstances, and it must be settled by the debtor himself, after taking the advice of his friends, if he cannot make up his own conscience on the point.

Thomas was a man of about sixty years of age, and for some time he had not been able to give that attention to his business which was required if he was to succeed. In spite of all his efforts he sank deeper into debt, failed to meet his obligations as they became due, and was adjudicated a bankrupt. He was afraid that he would be left destitute, so he kept back $500 for his private use, but surrendered all his other property to his creditors. He swore that he had made a full and true statement of his affairs, though he made no mention of the $500.

Thomas did wrong in keeping back and rendering no account of the $500, and he committed perjury by swearing that he had given a true account of his affairs. The law makes provision for the necessary support of the bankrupt, and so there was no solid ground for Thomas’ fear that he would be left destitute, and consequently no good ground for failing to account for the $500.

However, if the law made no provision for the necessary and immediate wants of the bankrupt, and if he had no prospect of being able to earn enough for his decent support and that of such as were dependent on him, so that the only prospect before him was to starve or to go to the workhouse, natural equity would then redress the too great rigor of the law, and permit the bankrupt to keep what was necessary for decent support. An unfortunate debtor cannot be justly compelled to reduce himself to destitution in order to satisfy the claims of his creditors, and the laws of modern civilized nations do not attempt to impose such an obligation.

The laws of bankruptcy in modern English-speaking countries are just and humane, and they confer a great benefit on the bankrupt by juridically relieving him of an insupportable burden of debt. They are, it is true, in some instances exacting with regard to the conditions on which the benefit is granted, but that is no more than the public good requires; grave abuses, as we know from the history of legislation in this matter, would inevitably result from a lax law of bankruptcy. It is only right then that stringent conditions should accompany the granting of relief to the bankrupt; the State has a right to impose them, and the subject is bound in conscience to observe them, especially if he is required to affirm on oath that he has done so. The confessor then should urge a penitent, who has had the misfortune to be brought into the Bankruptcy Court, to act in a straightforward way according to the laws of his country, and then he may with a safe conscience take advantage of what the law allows to the unfortunate bankrupt.

George had invested large sums of money in house property. He had borrowed a considerable portion of the purchase money under a well-grounded belief that the property would rise in value and enable him to reap a profit from his bargain. What was his dismay when, instead of rising, it steadily fell; he could not realize any portion of it, and he saw no prospect of being able to pay his debts as they became due. In his straits he went to his brother, who was one of his principal creditors and asked his advice. His brother advised him to make a declaration of inability to meet his obligations, and that as soon as possible. George promised to do so, volunteering to pay his brother in full beforehand, so that so much money at any rate should remain in the family, as he said. The brother agreed and took full payment for what was owing to him, although the other creditors had to be satisfied with fifty cents on the dollar.

George committed an act of injustice by paying his brother’s debt in full, while he knew that his other creditors would have to be satisfied with less than what was due to them. He knew that his property was not sufficient to pay all his creditors in full; they had equal right to receive their due proportion of payment; he defrauded his other creditors of their due proportion when he gave more than his share to his brother, so as to keep the money in the family.

Such transactions are against natural justice, they tend to defeat the chief end of bankruptcy laws, which is to secure an equitable distribution of the property of the debtor among his creditors, and they are rightly forbidden by positive law. In England as well as in the United States such preferences are declared null and void, or at least voidable, if made within the period fixed by the law of the country. In the United States the period fixed is four months previous to the filing of the petition, in England three months. If it were discovered that such a fraudulent preference had been given to one of the creditors, the official receiver or the trustee in bankruptcy could claim the money and add it to the assets to be distributed among the creditors according to law.

A doubt might arise as to whether a bankrupt would be justified in conscience in paying a creditor in full on account of his poverty or for some such extrinsic reason. Some theologians hold that, apart from any bankruptcy law, a debtor who could not pay all his debts might for such a reason prefer one creditor to another. However, it would seem to be unlawful to do this when one contemplates bankruptcy. The law allows of no such distinction, and if the bankrupt is to take advantage of the law for his relief, it is imperative, even from the point of view of conscience, that he should conform to the requirements and conditions which the law lays down. The law is his title to relief, and the law grants relief on certain conditions; those conditions then must be loyally observed by the debtor.

There is another question of some nicety connected with fraudulent preferences. The bankrupt does wrong in giving such a preference, as we have seen. Is a creditor who receives a fraudulent preference justified in keeping the money, or is he bound to make restitution?

There is some slight difference between the law of the United States and that of England with regard to fraudulent preferences, but we may here abstract from them, and consider the question from the purely moral point of view.

Such a creditor will of course be bound to make restitution, if the matter comes to the knowledge of the Court, and he is ordered to do so. Whether he is bound in conscience independently of such an order to make restitution is not free from doubt. He has after all only received what he had a right to, according to the terms of his contract with the debtor. The debtor did an injustice to his other creditors in paying this one in full; but the preferred creditor has no contract with the other creditors of the debtor; he is not bound like the debtor to safeguard their rights and satisfy their claims as far as possible; if he has no such obligation, and only receives what is due to him from his own contract, he does not seem to violate justice by taking payment of his debt in full, and so he is not bound to make restitution. I am confirmed in this opinion by what Mr. Brandenburg writes in his authoritative work on Bankruptcy: —“ There is involved,” he says, “no element of moral or actual fraud. It is simply a constructive fraud established by law upon the existence of certain facts and prohibited by it. There is nothing dishonest or illegal in a creditor obtaining payment of a debt due him from a failing debtor; nor in his attempting by proper and ordinary effort to secure an honest debt, though such act may afterwards become a constructive fraud by reason of the filing of a petition and adjudication in bankruptcy.”¹

¹ B. G. Brandenburg, The Law of Bankruptcy, 3d ed., p. 699 (1908).

And again: “While such a transfer is fraudulent and voidable, it is not so because morally wrong, but because the act says it is.” (P. 604.)

Against this view it may be urged with some plausibility that as the property of the bankrupt was not sufficient to pay all his creditors in full, no single creditor had a right to receive more than his just share, so that the preferred creditor sinned against justice by taking more than his share. To this, however, it may be answered that the argument holds when the property has been divided into portions, and assigned to satisfy the claims of the several creditors; but that it does not hold while the property is still undivided. When it is divided, each creditor has a right to his share, and injustice would be committed if he did not obtain his fair share; but while it remains, so to say, in bulk, all that can be said is that each creditor has a somewhat undetermined claim against the whole of the property. When therefore one creditor has received payment in full, it is not clear that he is bound in conscience, before any decision of the Court, to surrender a part for the benefit of the other creditors.

Another question of importance is whether a bankrupt who has obtained his discharge after paying his debts in part only, is bound in conscience to pay in full if he subsequently becomes able to do so.

The question does not arise when the creditors in consideration of the part payment which they have received expressly release the debtor from all further obligations, as, of course, they are competent to do. It is clear, too, that the natural obligation to pay one’s debts in full remains in spite of bankruptcy, unless it is extinguished by competent authority. Moreover, the obligation will certainly remain, if the law of the country expressly so decides, as did the Roman Law, which the scholastic theologians generally had in view when they discussed this question. Most modern European codes contain similar provisions. However, it seems equally certain that the law of the country can extinguish the obligation of making further payments, if it pleases to do so in favor of an honest bankrupt. We say “in favor of an honest bankrupt,” because the law does not intend to favor a dishonest bankrupt, nor has it the power to free such a one from his obligations. For the law cannot favor and promote injustice, as would be the case if it released a dishonest debtor from the obligation of paying his debts. The law can, however, for the public good release the honest bankrupt; for with just cause it can transfer property from one to another owner. This it certainly does by the law of prescription, and in other cases. In a commercial community there will not be wanting good reasons for such an exercise of power, for a load of debt pressing on the shoulders of the poor debtor kills enterprise, and injuriously affects trade. The common understanding with which debts are contracted will gradually accommodate itself to such a law, and thus by virtue of the implicit consent of the creditor, the legal discharge of the bankrupt debtor will be absolute and final, if the law so make it.

The whole question then is reduced to one of fact — What is the law of the country on the point, and what is its effect? With regard to the United States theologians have commonly held that a discharge in bankruptcy does not free the debtor in conscience from liability to pay his debts in full, if he subsequently become able to do so. However, several theologians of note thought the contrary a probable opinion.² Great weight should obviously be given in such a matter to the opinion of lawyers of repute; they are most likely to know the effect of the law. Mr. Brandenburg, in the work quoted above, expressly lays it down that the United States Bankruptcy Law does not free the conscience. “Since the discharge,” he writes, “is personal to the bankrupt he may waive it and, since it does not destroy the debt but merely releases him from liability — that is, removes the legal obligation to pay the debt, leaving the moral obligation unaffected — such moral obligation is a sufficient consideration to support a new promise,” etc. (P. 257.)

² Marc, n. 1022; Kenrick, II., n. 207.

In England on the contrary both theologians and lawyers commonly hold that the law of the land frees the debtor in conscience, if the discharge be absolute and unconditional. Otherwise, of course, the obligation will remain.

The same solutions would seem to hold, when after having made a composition with one’s creditors, the same question arises with regard to future acquired property. The law of the United States as well as that of England regulates such compositions, and decides that when confirmed they shall have the effect of a discharge. So that in the United States one who cannot pay his creditors in full, must make up the deficiency afterwards if he can, whether he makes a composition with his creditors or goes into the Bankruptcy Court; in England, if he has acted honestly and obtained an absolute and unconditional discharge, there will be no obligation to make good any deficiency, though the conduct of a bankrupt who should volunteer to do so would be highly approved by his creditors.

3 Crolly, III., n. 1232; Stephen, II., p. 188.