Spendthrift - Legal Issues

Legal Issues

The modern legal remedy for spendthrifts is usually bankruptcy. However, during the 19th and 20th centuries, a few jurisdictions, such as the U.S. states of Oregon and Massachusetts, experimented with laws under which the family of such a person could have him legally declared a "spendthrift" by a court of law. In turn, such persons were considered to lack the legal capacity to enter into binding contracts. Even though such laws made life harder for creditors (who now had the burden of ensuring that any prospective debtor had not been judicially declared a spendthrift), they were thought to be justified by the public policy of keeping a spendthrift's family from ending up in the poorhouse or on welfare. Such laws have since been abolished — in some countries — in favour of modern bankruptcy, which is more favourable to creditors.

Receivership is another equitable remedy for a spendthrift, by which a state-court-appointed trustee or attorney manages and sells the property of the debtor in default on debts.

In conservatorship, a fiduciary handles both the personal affairs and paying the debts of an incapacitated person. Infamously, Theodore Roosevelt was conservator for his brother Elliott Roosevelt I.