Insolvency is defined as “the condition of having more debts (liabilities) than total assets which might be available to pay them, even if the assets were mortgaged or sold.”[i] The Maryland State Archives is in possession of insolvency records from the late 17th Century up to the early 20th Century.
To Find Insolvency Records
To search for these records at the Maryland State Archives, start here. In the “Series” box enter the word “insolvency” and then hit “Filter.” Insolvency records in the catalog will display. They are ordered alphabetically by agency and then by county.
The insolvency papers, dockets, claims, petitions, etc. found at MSA contain entries of voluntary and involuntary petitions in bankruptcy, giving name of petitioner, date of petition, schedule of assets, affidavits, orders of court appointing preliminary and final trustees, certificate of publisher’s notice to creditors, date of final discharge, and costs. They are generally arranged chronologically and some records contain indices.
Below is an excerpt from the Carrolltonian, A Quarterly Publication of the Carroll County Genealogical Society, Vol. XXX Number 1. It provides an excellent introduction to insolvency records in Maryland. The publication can be found in its entirety here.
Maryland’s Early Insolvency Laws
At the beginning of the nineteenth century, men and women who had committed no other offense than indebtedness were crowding Maryland prisons and creating a huge burden for the state’s court system. A law was needed to provide debtors with better protection from imprisonment, and in 1805 Maryland legislators passed such a bill.
Over succeeding years, supplements to the 1805 law were enacted until there was a workable system for handling insolvency which prevented debtors from languishing in jail for long periods. To apply for the “benefits” of the 1805 law, an early nineteenth century debtor was required to:
Prepare a petition for release from prison
Prepare a list of all real and personal property owned
List the debts owed to him/her
List his/her creditors and the amount owed to each
Present an affidavit avowing the accuracy of the property list
Present an affidavit avowing the debtor has been a Maryland resident for 2 years
Present a certificate from a sheriff, warden or bailiff showing that the debtor was jailed for no other reason
Present a bond (like a bail bond) in case s/he failed to appear for questioning after release from prison
For an in-depth explanation of Maryland’s early insolvency laws, you may want to consult A Compilation of the Insolvent Laws of Maryland written in 1831 by John J Harrod.
As the 1805 law was refined over the years, various aspects of insolvency were addressed. “Benefits” of the law were only available to those who had been state residents for 2 years. No benefits were offered for someone with a “loss of $100 at any one time by gaming.” A creditor who wanted a debtor thrown in jail became responsible for paying $0.875 cents per week to cover the costs of incarceration. A trustee would be appointed to handle the financial affairs of each debtor. Eventually, the Insolvent Law of 1805 along with its supplements became the foundation of the state’s insolvent system for many years.
In 1827, the U.S. Supreme Court ruled that the individual states had the right to regulate or abolish imprisonment for debts as part of the remedy for “enforcing the performance of contracts.” Maryland passed a law in 1830 abolishing imprisonment for debt in certain judgments, but then repealed it in 1832. An 1833 federal law eliminated prison terms for debtors and many states soon followed the federal example. The year Maryland abandoned imprisonment as a punishment for debt is uncertain.
Trustees were appointed to handle disposal of the debtor’s property. The trustee was usually someone well-respected in the community. Occasionally, he may have been a responsible relative or neighbor of the debtor. To establish a legal contract between the debtor and trustee, the trustee paid the debtor one dollar and received all the debtor’s real and personal property, leaving him with only the “necessary wearing apparel and bedding of himself and family.” Eventually the harsh nineteenth century insolvency procedures evolved into the more lenient ones in modern bankruptcy cases.
By the middle of the century, the deeds covering insolvency were part of the “48th article of the [legal] code.” At the end of the century, there was no mention in the deeds of previous Maryland insolvency laws and about that time Congress enacted national bankruptcy laws.
[i] http://dictionary.law.com/ (accessed 10/5/2010)