Skip to main content

Introduction to Joseph Smith’s Bankruptcy

  1. Home > 
  2. The Papers > 

Introduction to Joseph Smith’s Bankruptcy

Page

In spring 1842, JS decided to apply for bankruptcy, under a new act created by the United States Congress to help individuals burdened by debts. The financial panics of 1837 and 1839 weakened the economy of the . Banks failed, land values plummeted, and many found themselves unable to pay their debts, all of which led to economic instability and a devastating recession that lasted into the 1840s. As a result, in August 1841 the United States Congress, led by members of the Whig Party, introduced a new bankruptcy act that allowed voluntary bankruptcy. For the first time in American history, any individual could apply for bankruptcy for personal or business debts. This was a dramatic departure from earlier legislation, in which bankruptcy was involuntary and dependent on creditors taking the debtor to court. The act took effect in February 1842 and gained widespread popularity. Tens of thousands of debtors across the nation applied to have their debts forgiven. In alone, more than fifteen hundred applications were filed over the course of the year. However, the act caused chaos in the judicial system as justices, struggling to interpret the legislation, provided inconsistent rulings, and the act was repealed by Congress in March 1843.
JS was one of thousands to use this new act to pursue bankruptcy, but he did so understanding that applying for bankruptcy was not without social and financial repercussions. However, JS saw it as his last resort given his difficult financial situation in 1842. JS was burdened with considerable debts related to business ventures and church construction efforts in , particularly those involving the . The Ohio mercantile firms of . and . had significant unpaid debts, and JS had taken financial responsibility for both firms’ debts. The Saints’ expulsion from also caused significant losses and led to costly land purchases in and in 1839 to provide homes for the refugee Saints. Several weeks after filing his bankruptcy application, JS wrote to his largest creditor, , explaining the pressure of unpaid debts that weighed on him and the “disadvantagious circumstances” he and other church leaders had experienced in trying to purchase land for the Saints in 1839.
Although it is unclear when JS first learned about the new bankruptcy act, he began the process of applying for bankruptcy in April 1842, with the help of attorney of the law firm Ralston, Warren & Wheat, based in , Illinois. This firm began advertising their legal services related to bankruptcy in spring 1842. A notice in the Wasp, a newspaper, stated that one of the firm’s partners would be in Nauvoo beginning on 14 April to assist anyone interested in petitioning for bankruptcy. JS’s journal recounts that he met with Warren on 14 April and then spent the next two days “busily engaged in making out a list of Debtors & invoice of Property to be passed into the hands of the assignee.” Two lists, or schedules, comprised part of the required paperwork to petition for bankruptcy: one list enumerated unpaid or partially paid debts and the creditors to which they were owed, and the other listed assets. The applicant was required to submit a petition, accompanied by these lists, to the federal district court. JS’s petition is no longer extant, but copies of the schedules of debts and assets have survived and are included in the documents featured here.
On 18 April, JS, in company with his brothers and and several other Latter-day Saints, traveled to , Illinois, to file the necessary petitions and depositions for their respective bankruptcy proceedings before the court clerk. Ralston, Warren & Wheat then filed JS’s bankruptcy application with the District Court in by 28 April 1842. Per the requirements of the bankruptcy act, the law firm published a notice announcing JS’s intention to apply for bankruptcy. This ran in two local newspapers, in the 6 May 1842 issue of the Sangamo Journal and in the 7 May 1842 issue of the Wasp.
The bankruptcy act of 1841 required individuals to enumerate their debts and assets and prohibited those petitioning for bankruptcy from transferring property, a financial asset. However, understanding of the act varied and many of those involved, including lawyers and individuals applying for bankruptcy, like JS, were inexperienced and unaware of the new rules and requirements of the act. In the midst of petitioning for bankruptcy, JS deeded personal property to himself as church trustee as well as to family. He may have done this in an effort to protect that property from creditors. Conveying property to dependents or trusts was a common means of shielding property in bankruptcy proceedings. In his schedule of debts, JS’s personal debts were conflated with those he had assumed on behalf of the church as its trustee. While the act allowed for the resolution of personal debts, it did not address fiduciary debts, or those connected with trustees, which may not have been clear to JS or his attorney. Additionally, JS or Warren mistakenly included the large amount of land that JS, , and had arranged to purchase from and his partners in 1839, which JS was still paying for and did not yet own, among his assets listed in the bankruptcy application.
JS also faced uncertainty in itemizing his debts because of the management of his business affairs by agent . While JS had authorized several individuals to act as his financial agents over the years, Granger’s role as an agent in was larger and more significant than most. He took responsibility for repaying outstanding debts in northeastern as well as substantial debts to merchants. His untimely death in August 1841 caused JS significant problems, as it left him unaware of the payments and other arrangements Granger had made on his behalf, and unable to list which debts had been paid or otherwise settled and which remained unpaid.
According to JS’s first published bankruptcy notice the first hearing in his bankruptcy proceedings was held on 6 June 1842. Although the court records are no longer extant, it appears that no objections were raised during JS’s June hearing and that his case proceeded normally. To fulfill legal requirements, Ralston, Warren & Wheat created a second notice on 17 June, announcing JS’s final hearing on 1 October 1842. This notice, like the first, was published in local newspapers.
In July 1842, excommunicated Latter-day Saint wrote a letter to the editor of the Sangamo Journal including allegations that JS had fraudulently transferred land before filing for bankruptcy. This accusation came to the attention of district attorney , who had begun a lawsuit against JS to recover a debt owed the government for the steamboat Nauvoo, purchased in September 1840. Butterfield inquired of the Solicitor of the Treasury, Charles B. Penrose, whether he should investigate the claims raised by Bennett. Penrose instructed Butterfield to proceed. As a result of his investigation, Butterfield determined that JS had indeed transferred land to noncreditors, including family members, while he was involved in bankruptcy proceedings. As a result, Butterfield filed objections with the Illinois District Court to deny JS’s and Hyrum Smith’s applications for bankruptcy. Because of these objections, the court delayed JS’s final bankruptcy hearing from 1 October to 15 December 1842.
In mid-December 1842, a group including , , , and other church leaders met with in on JS’s behalf hoping to engage Butterfield’s legal services to represent JS in opposing his extradition to . They also discussed JS’s and ’s bankruptcy proceedings. According to Clayton’s notes in JS’s journal, Butterfield was particularly concerned about the judgment owed the federal government for the steamboat Nauvoo. Butterfield expressed his view that this judgment was “the only hindrance” to JS’s application for bankruptcy being approved. In an effort to pay the judgment, on 16 December a group identified as the “High Council of the ” proposed to pay the debt in four installments with interest and to secure the payment with a mortgage worth double the amount of the debt. Having discussed matters with church leaders, Butterfield withdrew his objections against Hyrum Smith, who was not involved in the steamboat purchase or unpaid judgment, and Hyrum’s bankruptcy application was approved.
To address the question of JS’s bankruptcy, wrote to Penrose on 17 December regarding the agreement he had reached with church leaders to pay the judgment. In his 11 January 1843 response, Penrose was wary of the agreement and reluctant to accept the proposed terms. He instead asked church leaders to pay a third of the debt in cash and pay the remainder in three later installments. It is unclear whether Butterfield received Penrose’s January 1843 letter, as Butterfield wrote to Penrose in May 1843 asking again if he was authorized to accept the agreement with the “High Council.” Penrose, Butterfield, and church leaders apparently never finalized or acted on the agreement.
In spring 1843, Illinois District Court assignee apparently began gathering JS’s property to be sold, anticipating JS’s bankruptcy would be approved. Despite these efforts to move forward with his bankruptcy proceedings, it does not appear JS’s petition for bankruptcy was ever formally approved by the court. Although JS hoped to resolve his outstanding debts through bankruptcy, accusations by and the debt to the federal government made that impossible. JS made every effort to pay those debts he could, but many were left unresolved at the time of his death, complicating the settlement of his affairs.
Unfortunately, the trial and other district court records that comprised JS’s bankruptcy proceedings were destroyed in the Great Chicago Fire of 1871. Consequently, there are few surviving documents related to JS’s bankruptcy proceedings. Extant records include a later copy of a portion of JS’s bankruptcy application, comprising the schedules of debts and assets; newspaper notices, which were required as part of the bankruptcy proceedings; letters, particularly those written to or from various district attorneys prosecuting JS and the solicitor of the Treasury; and contemporaneous notes in journals or other correspondence.
View entire transcript

|

Cite this page

Source Note

Document Transcript

Page

Document Information

Related Case Documents
Editorial Title
Introduction to Joseph Smith’s Bankruptcy
ID #
20107
Total Pages
1
Print Volume Location
Handwriting on This Page

    Footnotes

    1. [1]

      See An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, pp. 440–449; see also Balleisen, Navigating Failure, 1–8.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    2. [2]

      An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, p. 449, sec. 17; “In the Matter of John C. Tebbetts,” 259–269; see also Balleisen, Navigating Failure, 1–8.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

      “In the Matter of John C. Tebbetts” / “Circuit Court of the United States, Massachusetts, September 7, 1842, at Boston. In Bankruptcy. In the Matter of John C. Tebbetts.” Law Reporter 5 (Oct. 1842): 259–269.

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    3. [3]

      Over 41,000 individuals in the United States filed petitions under the act; 1,592 petitions were filed in Illinois from February 1842 to March 1843, when the act was repealed. The new act required that an individual’s intention to apply for bankruptcy be printed as a public notice in local newspapers. Due to the high volume of notices, the Sangamo Journal, a Springfield, Illinois, newspaper, was forced to print extra editions for several of its summer issues, featuring hundreds of bankruptcy applications. (Balleisen, Navigating Failure, 124, 172; see also Notice, 28 Apr. 1842, as Published in Sangamo Journal; and Notice, 28 Apr. 1842.)

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    4. [4]

      “In the Matter of John C. Tebbetts,” 259–269; An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, p. 440; see also Balleisen, Navigating Failure, 1–8.

      “In the Matter of John C. Tebbetts” / “Circuit Court of the United States, Massachusetts, September 7, 1842, at Boston. In Bankruptcy. In the Matter of John C. Tebbetts.” Law Reporter 5 (Oct. 1842): 259–269.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    5. [5]

      Although the 1841 bankruptcy act would come to profoundly change the legal process and perception of bankruptcy in the United States, applying for bankruptcy was seen as undesirable and even dishonorable in early 1842. (Balleisen, Navigating Failure, 49–90.)

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    6. [6]

      The firms had operated stores in Kirtland and Chester, Ohio, and had purchased goods for the stores on credit from wholesale merchants in New York in 1835 and 1836. JS was not a partner in the firm of Cahoon, Carter & Co., but by 1839 he had personally assumed both companies’ debts and assigned Oliver Granger to settle them. (Introduction to Kirtland Mercantile Firms; Agreement with Mead & Betts, 2 Aug. 1839.)

    7. [7]

      Letter to Horace Hotchkiss, 13 May 1842.

    8. [8]

      Advertisement, Wasp, 16 Apr. 1842, [3]; 23 Apr. 1842, [3].

      The Wasp. Nauvoo, IL. Apr. 1842–Apr. 1843.

    9. [9]

      JS, Journal, 14–16 Apr. 1842; see also Schedule of Creditors, ca. 14–16 Apr. 1842; and Inventory of Property, ca. 14–16 Apr. 1842. JS’s scribe Willard Richards undoubtedly meant “creditors” rather than “debtors” when referring to the first list, as debts due to JS were noted on the list of property, or assets, and the other legally required document was a list of JS’s creditors.

    10. [10]

      Schedule of Creditors, ca. 14–16 Apr. 1842; Inventory of Property, ca. 14–16 Apr. 1842; and An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, pp. 440–442, sec. 1.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

    11. [11]

      See JS, Journal, 18 Apr. 1842. In addition to JS and his brothers, several prominent Nauvoo residents and church leaders also applied for bankruptcy, including Sidney Rigdon, Elias Higbee, Amos Davis, Henry G. Sherwood, and Vinson Knight. (Notice, 28 Apr. 1842, as Published in Sangamo Journal; see also Bankruptcy Notices for Hyrum Smith, Samuel Smith, Sidney Rigdon, Elias Higbee, Amos Davis, Henry G. Sherwood, and Vinson Knight, Sangamo Journal, 6 May 1842, [3]; and Letter from Calvin A. Warren, ca. 23 June 1842.

      Sangamo Journal. Springfield, IL. 1831–1847.

    12. [12]

      An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, pp. 440–442, sec. 1; and Notice, 28 Apr. 1842.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

    13. [13]

      Notice, 28 Apr. 1842, as Published in Sangamo Journal; Notice, 28 Apr. 1842. JS’s notice was one of over 350 bankruptcy notices printed in the 6 May issue of the Sangamo Journal. This and other issues of the Sangamo Journal from this period included notices submitted by prominent attorneys such as Jesse B. Thomas, Josiah Lamborn, Lyman Trumbull, and Abraham Lincoln for clients all over western Illinois.

    14. [14]

      Conveying property to dependents or trusts was a common means of shielding property in bankruptcy proceedings following the Bankruptcy Act of 1841. (Deed to Julia M. Smith and Others, 17 Mar. 1842; Historical Introduction to Deed to Emma Smith, 13 June 1842; Bond from Erie Rhodes, 16 Sept. 1841; Balleisen, Navigating Failure, 94–96.)

      Balleisen, Edward J. Navigating Failure: Bankruptcy and Commercial Society in Antebellum America. Chapel Hill: University of North Carolina Press, 2001.

    15. [15]

      An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, p. 442, sec. 2; see also Letter to Horace Hotchkiss, 30 June 1842; and Deed to Emma Smith, 13 June 1842.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

    16. [16]

      Inventory of Property, ca. 14–16 Apr. 1842; Bond from Horace Hotchkiss, 12 Aug. 1839–A; Letter from Horace Hotchkiss, 27 May 1842. In August 1839, JS had partnered with his brother Hyrum Smith and Sidney Rigdon of the church’s First Presidency to purchase several hundred acres of land in Illinois from Hotchkiss and his partners, John Gillet and Smith Tuttle, for $110,000.

    17. [17]

      See Power of Attorney to Oliver Granger, 27 Sept. 1837; Authorization for Oliver Granger, 13 May 1839; Agreement with Mead & Betts, 2 Aug. 1839; and Agreement with Oliver Granger, 29 Apr. 1840.

    18. [18]

      Notice, 28 Apr. 1842; Notice to Creditors and Others, 17 June 1842; An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, pp. 443, 447, secs. 4, 10–11.

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

    19. [19]

      “Gen. Bennett’s Third Letter,” Sangamo Journal (Springfield, IL), 15 July 1842, [2]; Historical Introduction to Deed to Emma Smith, 13 June 1842.

      Sangamo Journal. Springfield, IL. 1831–1847.

    20. [20]

      See Introduction to United States v. Haws et al.; and Oaks and Bentley, “Joseph Smith and Legal Process,” 167–177.

      Oaks, Dallin H., and Joseph I. Bentley. “Joseph Smith and Legal Process: In the Wake of the Steamboat Nauvoo.” Brigham Young University Law Review, no. 3 (1976): 735–782.

    21. [21]

      Letter, Justin Butterfield to Charles B. Penrose, 2 Aug. 1842; Charles B. Penrose to Justin Butterfield, Chicago, IL, 12 Aug. 1842, microfilm, Records of the Solicitor of the Treasury, copy at CHL.

      Records of the Solicitor of the Treasury / National Archives Reference Service Report, 23 Sept. 1964. “Record Group 206, Records of the Solicitor of the Treasury, and Record Group 46, Records of the United States Senate: Records Relating to the Mormons in Illinois, 1839–1848 (Records Dated 1840–1852), Including Memorials of Mormons to Congress, 1840–1844, Some of Which Relate to Outrages Committed against the Mormons in Missouri, 1831–1839.” Microfilm. Washington DC: National Archives and Records Service, General Services Administration, 1964. Copy in Records Related to Church Interaction with Federal Government, 1840–1852, CHL.

    22. [22]

      Letter, Justin Butterfield to Charles B. Penrose, 11 Oct. 1842. For a legal consideration of Butterfield’s evidence, see Oaks and Bentley, “Joseph Smith and Legal Process,” 182–186.

      Oaks, Dallin H., and Joseph I. Bentley. “Joseph Smith and Legal Process: In the Wake of the Steamboat Nauvoo.” Brigham Young University Law Review, no. 3 (1976): 735–782.

    23. [23]

      JS, Journal, 9–20 Dec. 1842.

    24. [24]

      Agreement Henry G. Sherwood and Others with Justin Butterfield, 16 Dec. 1842. Of those individuals who signed the agreement, only Henry G. Sherwood and Alpheus Cutler were members of the Nauvoo high council in December 1842.

    25. [25]

      Letter, Justin Butterfield to Charles B. Penrose, 17 Dec. 1842.

    26. [26]

      Letter, Charles B. Penrose to Justin Butterfield, 11 Jan. 1843.

    27. [27]

      Letter, Justin Butterfield to Charles B. Penrose, 25 May 1843.

    28. [28]

      The reasons for this are unclear but may have been influenced by the repeal of the bankruptcy act.

    29. [29]

      Letter from Horace Hotchkiss, 7 Apr. 1843. According to the bankruptcy act of 1841, an assignee was given all rights to distribute and sell the bankrupt individual’s property. By early June 1842, the federal district court in Springfield had appointed Joel Catlin to be the assignee for individuals residing in Nauvoo and elsewhere in Hancock County, Illinois. With few surviving documents it is difficult to know just how far Catlin got in gathering and potentially liquidating JS’s assets. Tax records for 1842 indicate that land owned by JS was transferred to Catlin, and a single extant receipt indicates that Catlin sold at least a small portion of JS’s assets. (An Act to Establish a Uniform System of Bankruptcy [19 Aug. 1841], Public Statutes at Large, 27th Cong., 1st Sess., chap. 9, pp. 442–443, sec. 3; Letter from Calvin A. Warren, ca. 23 June 1842; Book of Assessment, 1842, First Ward, Nauvoo, IL, Records, CHL; Joel Catlin to Hiram Kimball, Receipt, 19 July 1843, in Mormon File, ca. 1805–1995, Huntington Library, San Marino, CA.)

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

      Nauvoo, IL. Records, 1841–1845. CHL. MS 16800.

      Mormon File, ca. 1805–1995. The Huntington Library, San Marino, CA.

    30. [30]

      Although we lack court records to confirm this, contemporary correspondence appears to. In August 1844 Butterfield wrote in a letter to Penrose that he had “defeated Joseph Smith the Mormon Prophet from obtaining the benefit of the Bankrupt Act.” (Letter, Justin Butterfield to Charles B. Penrose, 6 Aug. 1844.)

    31. [31]

      The records for JS’s case and other Illinois district court records were moved to Chicago in 1855, when the federal circuit court district of Illinois was divided into two districts, one located in Springfield and the other in Chicago. (An Act to Divide the State of Illinois into Two Judicial Districts [13 Feb. 1855], Statutes at Large and Treaties of the United States of America 33rd Cong., 2nd Sess., chap. 96, pp. 606–607; Putnam, “Life and Services of Joseph Duncan,” 170.)

      The Public Statutes at Large of the United States of America, from the Organization of the Government in 1789, to March 3, 1845. . . . Edited by Richard Peters. 8 vols. Boston: Charles C. Little and James Brown, 1846–1867.

      Putnam, Elizabeth Duncan. The Life and Services of Joseph Duncan, Governor of Illinois, 1834–1838. Reprint. Springfield, IL: Illinois State Journal Co., 1921.