The Evolution of Debt Discharge: From Gold Standard to Modern Monetary Instruments

The concept of debt discharge in the United States fundamentally changed in 1933 when House Joint Resolution 192 (HJR 192) was passed, abolishing the gold standard and making it illegal to demand payment in gold, silver, or any sp...

The concept of debt discharge in the United States fundamentally changed in 1933 when House Joint Resolution 192 (HJR 192) was passed, abolishing the gold standard and making it illegal to demand payment in gold, silver, or any specific form of currency. This resolution, later codified into 31 U.S.C. § 5118, mandated that any monetary instrument-such as promissory notes, bills of exchange, or bonds-could legally discharge a debt, eliminating the need for gold or Federal Reserve Notes (FRNs) as exclusive payment methods. The introduction of the Uniform Commercial Code (UCC) in 1952 further strengthened this framework by standardizing commercial transactions across the United States. Under UCC 3-104, any monetary instrument, whether negotiable or not, can serve as legal tender to discharge a debt, provided it is endorsed or authorized by the appropriate party. This includes promissory notes, bills of exchange, bonds, and other financial instruments. Together, HJR 192, 31 U.S.C. § 5118, and UCC 3-104 created a flexible debt discharge system, allowing people to use lawful monetary instruments to settle debts without being restricted to Federal Reserve Notes. This shift ensured that no creditor can lawfully demand a specific currency or payment method, thereby redefining legal tender to encompass any valid monetary instrument capable of satisfying an obligation.

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The Evolution of Debt Discharge: From Gold Standard to Modern Monetary Instruments

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