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THE NATIONAL BANKRUPTCY LAW
Which Passed Congress at Its Last Session and
Became Effective August i, and
November i, 1898.
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THOSE WHO MAY BECOHE BANKRUPT?
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The New Act Discussed From Lawyer's Standpoint By W. C,
Spraguc, President of the Sprague School of Law.
Tim Xutlonal llankiruptey Jaw,
Wllloll IMINMttl flic ltwit Congress, wont
Into eti'cot t oikv on. I Us pnijje
July 1, 181)8; bit. no petition far vol
untary iNiukruptvy couM Im flletl un
111 AiiiffUKt. nt following', ami no peti
tion for Involuntary 'bankruptcy
could le tlll until Noveniibcr Jt;
tilmt Is, after Aupu-st. 1st n mam inny
voluntarily become n iKtnkrupt, and
before November 1st his creditors
eunot compel diim to bccome one.
The law con'tnine over 10,000 woixls,
niul, as Is the en. wltih all laws cov
ering so great n .subject, it provis
ions nre so many audi so interde
pendent thnt 'tlie average eltlzeiv will
do wHl 1o let. lawyer real and in
terpret it for him; niul even then, tihe
chnnces' nre nbout even that lie inny
not understand It, for scarcely was
the law hrin ted and in the hands of
tihe people before lawyers were con
tending over it, differing materially
regarding it force and effect niul the
praotce under it. Indeed, tlhere is
every reason to expect that long and
bitter controversies in the courts will
ensue before tihe practice is MsWled
ami the lawyer audi his client) may
feel the ground under thcini secure.
It is desirable that the classes of
persons wiIvcmii the law was intended
to benefit should be distinctly
pointed out. It has been held 'by some
that the law is a creditor's law, intend
ed to benefit first, and most of nil, the
craUtor class; by others it is assorted
to oe a debtors' law and for tlhai
great uuiiubor of citizens who, since
tihe last bankruptcy act wa annulled,
1S78, have been unfortunate and need
the aid of legislation to enable them
to shake off tihe load that oppresses
them and to start nfrcslh.
We" shall, in this article, look upon
the law ns intended for 'tihe unfortu
nate debtor, and seek to determine
whom 'the law looks upon as such ami,
therefore, seeks to relieve. The law
says (Sec. 5, Chap. Ill): "Any per
son, who owes dobts, except a cor
poration, may become a voluntary
bankrupt." By 'voluntary banlkrupt
is mean one who becomes si'ah by
virtue of his own conscious act. But,
first, what is meant. 'by bankrupt.
This term is not synonymous witfh
insolvent. An insolvent is one wflio is
tumble to pay 'his debts; a bankrupt
is one who Qms been declared by a
court 'to be unable to pay Ills debts.
A iNinkrupt is an insolvent", but an in
solvent is not necessarily a bankrupt.
Hence, the law means to say that
any .person who owes debts (except a
corporation.) may apply to a court to
have himself adjudged a bankrupt.
Corporations are, in tihe eyes of tine
law, "persons;" .hence, as Congress
wished to take it out of the power of
corporations to go into court and ask
to be adjudged iNinkrupt and relieved
of their dobts, it was necessary to
specifically except them. Under some
state insolvency laws, which this Na
tional Bankruptcy Law has now su
perceded', a corporation1 could file a
petition in insolvency.
Under tihe provisions of the new law
certain classes of corporations, as
those engaged' principally in manu
facturing, tradng, prating-, publish
ing, or mercantile pursuits, may, if
they owe debts of $1,000 or more, be
proceeded1 nganst by creditors in
bankruptcy proceedings; but no pri
vate corporation of any kind cam go
into court and asK to 'be declared1 a
'bankrupt; and this applies to incor
porated banks, insurance companies,
fraternal societies, etc., as well as
limited or other partnership associa
tions organized under laws making the
capital subscribed alone responsible
for the debts of the association.
One need not be a citizen of the
United States in order to take ad
vantage of the law. An' alien wing
debts here may file his own1 petition
in bankruptcy as soon as he has ac
quired the necessary residence in the
United States.
The better opnion is that ani infant
(that is, one under -legal age) cannot
be adjudged a 'bankrupt, though a
case in the Federal courts under a
former law, and reported1 as In re
Book, 3 Mcavean, 317, holds to the con
trary. A lunatic or insane thjtsoti' cannot
be adjudged a bankrupt.
As to married women, it may be
said that, the court will regaTd the
laws of the sttc where the woman
has her legal residence. If by the laiw
of that state a woman may make va3
id contracts in trade, she ma-" ...e her
petition in bankruptcy, otSierwse not-
Sec. 5 of Chap. III., provides, "A
partnership during the continuation
of the partners' business, or nfter
its dissohiton and before the final) Bet
tlemant 'thereof, may be adjudged1 n
bankrupt. '
One or more of the partners may
file the petition.
After a firm is dissolved, any one
of the partner may petition the court
to lmvo the firm declared bankrupt so
long as nny unfinished business,
debts, credits, or assets, remain. If
on petition In bankruptcy by one or
more partners, one or more of the
partners is not adjudged bankrupt,
the partnership property will not be
administered In bankruptcy, unless
by consent of the partner or partners
not adjudged bankrupt; in such a
case the artner or partners not ad
judged iNinkrupt settle the partner
ship business as expeditiously as its
nature will permit, and account for
the interest of the partner or partners
adjudged bankrupt.
As to the cost of the procedure, I
may say that the great expense uu
talled by the old laws was what
brought about their repeal. Under
the new law, fees are moderate.
The petitioner must deposit with
the clerk the sum of twenty-five, dol
lars ($2."), except in the case of n pe
tition "of a proposed voluntary
bankrupt, which is accompanied' by
an affidavit s'tnting- that the petition
er is without, and cannot, obtain, the
money with which to pay such fees."
In such u case no deposit is required.
Of the twenty-five dollars ($25.00), ten
dollars $(10) is for clerk's fee, ten
dollars ($10) for referee's fee, and five
dollars ($:) for trustee's fee. The
trustee, in addition', receives such
commission ns may be allowed by the
court, not to exceed three per centum
on the first five thousand dollars ($.",
000), to 'be paid as dividends ami com
missions, two per centum om the sec
ond five thousand dollars ($5,000),
and one per centum on the balance.
The referee will receive, in addition
to the ten dollars ($10) deposited with
the clerk, a commission of "one per
centum on sums to be paid' as divi
dends and commissions, or one-hnlf of
one per centum on the amount to be
paid to creditors upon1 the confirma
tion of a composition." Tims, n a
ease where the net assets for distri
bution amount to twelve thousand
dollars ($12,000), the clerk's fee would
be, as in all cases, ten dollars ($10);
the referee's, unless an offer of com
position was made and) confirmed,
one hundred and thirty dollars
($130); the trustee's not to exceed two
hundred and' seventy- hvo dollars
($275) a total expense for these, of
ficers in such a case of four hundred
and fifteen dollars ($415).
The petitioner is allowed also one
reasonable attorney's fee, to lie paid
out of the estate before distribution,
to creditors, the amount, to be fixed
bv the court.
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