STATE INSOLVENCY LAWS 2. In the United States, a state has authority to pass insolvency laws, provided they do not impair the obligation of contracts or conflict with any existing laws of congress;" it is provided in the federal constitution that congress shall have power to establish "uniform laws on the subject of bankruptcies throughout the United States."'1o Imprisonment for debt is abolished, except in certain cases, in most of the United States by statutes, called insolvency laws. These provide, in general, that the debtor, upon assigning all his property, real and personal, for the payment of his debts, is entitled to be discharged from prison for such debts and is not liable to rearrest. Were a state to pass an insolvent law providing that where a debtor applies all his property to the payment of his debts, those debts shall thereby become extinguished, this law would impair the obligation of the debtor's contract to pay his debts, and would be void. The state insolvent laws, therefore, do not provide that the debts shall be wiped out, but merely that the debtor may, by fulfilling certain conditions, be released from imprisonment on account of them. The debts remain binding upon the debtor. The creditors may, after the debtor is released, get judgments against him for the balances still due them, but they cannot again arrest him. All that the state can do is to take away the penal consequences of the debt or default of the debtor. The only body which can take away the liability for debt is congress. The debtor who applies to a court for release from imprisonment for his debts, upon condition that he give up all his property toward payment of the same, is said to take the benefit of the insolvent laws. His petition for discharge from imprisonment, giving a schedule of all his property, of all the debts due by him, of the causes of insolvency, etc., is filed. After notice has been given to the creditors, a hearing is held in order to ascertain if there be any fraud, 917 How. (U. S.) 157 (1854). 10 Const. U. S.. Art. I, Sec. 8. Cl. 4 and, if none appear, he is discharged from imprisonment finally. He then executes an assignment of all his property to a trustee selected by the creditors. The trustee brings suit and gets in all the debts. There is a duty on each creditor, if he have actual notice, to make his claim. In so far as the debt is paid, the debtor is discharged. But he still remains liable for the balance. The difference between insolvency laws and bankruptcy laws is this: Insolvency laws abolish imprisonment for debt, and do not discharge the debt; but the bankruptcy laws wipe out the debt itself, and allow the debtor to start afresh in the world. Bankruptcy proceedings can be instituted by the debtor or the creditors; insolvency proceedings generally at the instance of the debtor. The United States bankruptcy law supersedes the state insolvency laws. They still remain in force in so far that imprisonment for debt has been abolished; they are only suspended, however, and not repealed, and, if the United States bankruptcy laws were to be repealed, the state insolvency laws would come into force immediately. There is no reason why a state may not pass an insolvency law, even while the federal law is in force. If there be a point which is not covered by the federal law, the state law operates. BANKRUPTCY LAWS 3. An insolvent debtor only becomes a bankrupt by being adjudged to be such by a properly constituted court of bankruptcy. The law of bankruptcy is entirely statutory in its origin and development. Various laws have been passed in England dealing with this subject. The first bankruptcy law in the United States was passed by congress in 1800, and repealed in 1803; the second was passed in 1841, and repealed in 1843; the third was passed in 1867, and repealed in 1878. The present bankruptcy law was passed on July 1, 1898, and went into effect at once. It aims at lightening in every way possible the expense of proceedings in bankruptcy, and was designed to establish a uniform system of bankruptcy throughout the United States. The power to pass a bankruptcy law, as before stated, is conferred upon congress by the United States constitution." Under its provisions, congress may pass voluntary as well as involuntary bankruptcy laws; both are within the policy of the constitution. The law of 1898 provides for both voluntary and involuntary bankruptcy. Under the constitutional provision that the laws of congress on the subject of bankruptcies shall be uniform throughout the United States, the law must operate in the same way everywhere. That such uniformity may exist, it is necessary that the operation of all the state laws upon the subject be suspended by the passage of a United States bankruptcy law. The establishment of uniformity is incompatible with state legislation on that part of the subject to which the acts of congress may extend." DEFINITIONS 4. In the present United States bankruptcy law, defining the meaning of certain words and phrases, the following definitions are given:" A person against whom a petition has been filed includes a person who has filed a voluntary petition. Bankrupt includes a person against whom an involuntary petition or an application to set a composition aside or to revoke a discharge has been filed, or who has filed a voluntary petition, or who has been adjudged a bankrupt. Courts of bankruptcy include the district courts of the United States and of the territories, the supreme court of the District of Columbia, and the United States court of the Indian Territory, and of Alaska. Creditor includes any one who owns a demand or claim provable in bankruptcy, and may include his duly authorized agent, attorney, or proxy. A person shall be deemed insolvent within the provisions of this act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, = 11 Const. U. S., Art. I, Sec. 8, Cl. 4. 124 Wheat. (U. S.) 122 (1819). 13 U. S. B. L. 1898. Sec. 1. concealed, or removed, or permitted to be concealed or removed with intent to defraud, hinder, or delay his creditors, shall not, at a fair valuation, be sufficient in amount to pay his debts. Debt includes any debt, demand, or claim provable in bankruptcy. Discharge means the release of a bankrupt from all his debts which are provable in bankruptcy, except such as are excepted by the law. Persons include corporations, except where otherwise specified, and officers, partnerships, and women, and when used with reference to the commission of acts which are herein forbidden shall include persons who are participants. in the forbidden acts, and the agents, officers, and members of the board of directors or trustees, or other similar controlling bodies of corporations. Petition shall mean a paper filed in a court of bankruptcy or with a clerk or deputy clerk by a debtor praying for the benefits of the law, or by creditors alleging the commission of an act of bankruptcy by a debtor therein named. 5. The district courts of the United States in the several states, the supreme court of the District of Columbia, and the district courts of the several territories, and the United States courts in the Indian Territory and the District of Alaska, are made courts of bankruptcy, and are invested with such jurisdiction at law and in equity as will enable them to exercise original jurisdiction in bankruptcy proceedings, to adjudge persons bankrupt and to take cognizance, generally, of all bankruptcy matters." Where the alleged bankrupt is making away with the property of the bankrupt estate before the trustee is appointed, the bankruptcy court has jurisdiction, on the application of his creditors, to grant an order restraining him from doing so." It has jurisdiction, also, over the liens 14 U. S. B. L. 1898, c. 2. Sec. 2; see Appendix: United States Bankruptcy Law of 1898. 15 89 Fed Rep. 691 (1898). which any creditor holds on the property of the bankrupt. It has a right to inquire as to the priority of liens by the state laws, and determine which among several such liens has priority." It can also restrain the enforcing of liens. where such a course would be to the prejudice of the other creditors; or it can order a sale of the property free from the liens, the proceeds to be distributed among the lien creditors according to priority, and the balance, if any, to go to the general creditors." It may restrain the issuing of any execution out of any state court after a debtor has been adjudicated a bankrupt; for, when the adjudication has been made, all property of the bankrupt passes to the trustee as of the moment of adjudication. The bankruptcy court would even go so far as to commit to jail any officer of the state court who would attempt to carry out such an execution. In order that a man may be adjudged a bankrupt by any district court of the United States sitting as a court of bankruptcy, he must have his principal place of business, resided, or had his domicil, within the district for the greater part of the preceding six months." If a petition be filed by a person at the place of his domicil, and three of his creditors file a petition at the place of his residence, the court in which the first petition, whether it be a voluntary or an involuntary one, is filed, has jurisdiction, and the second court must transfer its proceedings to the first court. There is a difference between a man's domicil and his residence. Residence is the place where a man is perhaps temporarily stopping, but no place can be a man's domicil unless he have the intention of making it his permanent home. Where a corporation has its main office is the place where it should be adjudged a bankrupt. ACTS OF BANKRUPTCY 6. No person can be adjudged a bankrupt unless he have committed one of the several acts of bankruptcy defined by the bankruptcy law itself. Acts of bankruptcy by a person 16 92 Fed. Rep. 893 (1899). 173 How. (U. S.) 292 (1845). 1891 Fed. Rep. 630 (1899). |