the purpose of giving a preference as hereinbefore provided, or a general assignment for the benefit of his creditors, if by law such recording or registering is required or permitted, or if it is not, from the date when the beneficiary takes notorious, exclusive or continuous possession of the property, unless the petitioning creditors have received actual notice of such transfer or assignment."

It will be seen from the foregoing that the following facts must exist before involuntary bankruptcy proceedings can be instituted: (1) the debtor must have had his residence or domicile or place of business for the greater portion of six months within the district over which the court has jurisdiction; (2), he must owe debts to the amount of at least one thousand dollars; (3) that the petitioning creditor or creditors have unsecured claims aggregating five hundred dollars (see section V); (4) that the debtor is insolvent, and (5) that he has committed an act of bankruptcy within four months next preceding the date of the petition.

Act of bankruptcy.-By an act of bankruptcy is meant an act on the part of an insolvent debtor which may work a detriment to his creditors in general. The bankruptcy law provides that acts of bankruptcy by a person shall consist of his having "(1) conveyed, transferred, concealed or removed or permitted to be concealed or removed, any part of his property with intent to hinder, delay or defraud his creditors, or any of them, or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors, or (3), suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference, or (4) made a general assignment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee of his property, or because of insolvency a receiver or trustee has been put in charge of his property under the laws of a state or territory or of the United States, or (5), admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt on that ground.”

In case it is claimed that the alleged bankrupt has conveyed his property in fraud of creditors, he may show that he is solvent, and defeat the proceedings; in case it is claim

ed that he has given a preference or suffered any creditor to obtain one, he must appear in court with his books and papers and submit to an examination as to his solvency, and if he does not appear it is presumed that he was insolvent when he gave or permitted such preference.

Partnerships.-A partnership may be adjudged bankrupt. The creditors of the partnership appoint the trustee. The individual members of the partnership or any of them may also be adjudged bankrupts. The court which has jurisdiction of one partner may have jurisdiction of all the partners and of the administration of the partnership and individual property. The trustee must keep separate accounts of the partnership property and of the property of the individual members. The net proceeds of a partnership estate shall be appropriated to the payment of the partnership debts and the net proceeds of the individual estate of each partner to the payment of his individual debts. If any surplus remains of the property of the partners or either of them after paying their individual debts, it may be added to the partnership assets and be applied to payment of partnership debts, and if any surplus remains of partnership property it is added to the assets of the individual partners in the proportion of their respective interests in the partnership. Claims may be proved against a partnership estate for individual debts and vice versa, so as to effect a proper distribution.

"In the event of one or more but not all of the members of a partnership being adjudged bankrupt, the partnership property shall not be administered in bankruptcy unless by consent of the partner or partners not adjudged bankrupt; but such partner or partners not adjudged bankrupt shall settle the partnership business as expeditiously as its nature will permit, and account for the interest of the partner or partners adjudged bankrupt."

Exemptions.-The bankruptcy law recognizes the right of the bankrupt to the exemptions permitted by the laws of the state in which a petition is filed against him. What these exemptions are is discussed elsewhere in this book. The bankrupt should claim his exemptions at the time of filing his petition or inventory. The court sets the exemptions apart and has power to determine all question in relation thereto.

Duties of bankrupts.-The bankrupt must attend the

first meeting of his creditors if directed by the court to do so, and must attend the hearing of his application for a discharge from indebtedness, if he file one. He must comply generally with all lawful orders of the court, examine claims filed against his estate, execute such papers as the court orders, including transfers to the trustee of property in foreign countries and disclose to the trustee knowledge of any attempt by any one to violate the bankruptcy law, or defraud his estate. He must make a detailed schedule of his property, showing kind, location and value, and a list of his creditors with their residence and amount due each, what for, and the security held by them, and he must also specify the property claimed as exempt. The bankrupt at the first meeting of his creditor and whenever the court orders at other times, must submit to an examination concerning the conduct of his business, the cause of his bankruptcy and his business dealings generally.

Protection and detention of bankrupts.-A bankrupt is exempt from arrest on civil process except for contempt or disobedience of the orders of a court of bankruptcy and when issued in an action in a state court for a claim or debt which cannot be released by a discharge in bankruptcy, and in such cases he is exempt from arrest when in attendance on a court of bankruptcy or engaged in the performance of a duty imposed by the bankruptcy law.

A court of bankruptcy may issue a warrant of arrest to bring a bankrupt before the court for examination when it is satisfied that the bankrupt will leave the jurisdiction to avoid examination, and may detain him not over ten days. Courts of bankruptcy may also extradite bankrupts from other jurisdictions.

Suits by and against bankrupts.--A suit pending against a bankrupt, if based on a claim from which he may be discharged, may be stayed, that is, proceedings therein may be suspended, for twelve months after adjudication, and if he applies for discharge within that time, it may be further stayed until the discharge is granted or denied. The trustee in bankruptcy may by direction of the court prosecute or defend any suit in which the bankrupt is interested.

Composition.-A bankrupt may offer a composition to his creditors after he has been examined and has filed a schedule of his property, and list of creditors. By a composition

is meant an offer of settlement, in which all creditors must be treated alike. A composition, in order to be effective, must be accepted in writing by a majority in number and amount of the claims allowed against the bankrupt's estate and the consideration to be paid by the bankrupt and money necessary to pay all debts which have priority and the costs of the proceeding must be deposited in such manner as is directed by the court. A composition does not need to be made in cash; a debtor may offer property or notices, for instance.

After the foregoing terms have been complied with, a time and place for hearing the bankrupt's application for a confirmation of the composition is fixed by the court and all creditors are notified. The bankruptcy law provides that the composition shall be confirmed, if it is found to be for the best interests of creditors, and that the bankrupt has not violated the bankruptcy law and that the offer of composition and its acceptance were made in good faith and not in violation of the act. When the composition is confirmed, the bankruptcy proceedings are at an end and the bankrupt again takes possession of his property; in case it is not confirmed, the administration of the estate proceeds. If fraud was practiced in obtaining a composition the court may set it asside and re-instate the proceedings within six months of the time of confirmation.

Discharges. By a discharge in bankruptcy is meant an order of a court of bankruptcy by which the bankrupt is declared free and discharged from all debts and liabilities, with certain exceptions. After one month and within twelve months after being adjudged a bankrupt, a bankrupt may apply for his discharge; if he was unavoidably prevented from filing such application, the time may be extended six months more. A time for hearing is set and all creditors notified and the court will discharge the bankrupt unless 1) he has committed an offence punishable under the bankruptcy act by imprisonment, or 2) has failed to keep books or records or destroyed or concealed them with intent to conceal his financial condition, or 3) obtained property on credit from any person upon a material false statement in writing made to such person for the purpose of obtaining such property, or 4) within four months preceding the filing of a petition in bankruptcy transferred, removed or destroyed, or concealed or permitted to be removed, destroy

ed or concealed any of his property with intent to hinder, delay or defraud his creditors, or 5) in voluntary proceedings, has been granted a discharge in six years, or 6) has refused to obey any lawful order of the court in the course of the proceedings. A discharge may be revoked within one year after it is granted if it can be shown that it was obtained by fraud. Persons who are jointly liable with the bankrupt or as guarantor or surety for him are not affected by his discharge.

A discharge in bankruptcy releases the debtor from all debts that might have been proved against his estate except (1) taxes due the United States or state, county, district or municipality in which he resides; (2) liabilities for obtaining property by false pretenses or representations, or for wilfull and malicious injuries to the person or property of another, or for alimony due or to become due or for maintenance or support of wife or child, or for seduction of an unmarried female or for criminal conversation; (3) debts which have not been scheduled in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor has actual knowledge of the proceedings in bankruptcy, or (4) were created by his fraud, embezzlement, misappropriation or defalcation while acting as an officer or in any fiduciary capacity.

SECTION IV.

OFFICERS IN BANKRUPTCY PROCEEDINGS.

In order to expedite bankruptcy proceedings, the bankruptcy law provides for the appointment of referees and trustees in bankruptcy. The object of the law is to relieve the United States courts of all detail work in bankruptcy matters and to put it into the hands of the referee and trustee. The acts of the referee and trustee, however, are always under the supervisory control of the court itself. After an adjudiciation of bankruptcy by the court, the whole bankruptcy matter is transferred to the referee, who thereafter conducts the proceedings, with a few exceptions. Referees are appointed for two years by the court, subject to removal. They are appointed in sufficient numbers within the jurisdiction of each court so that bankruptcy business may be conveniently transacted. Referees are usually attorneys and must take the usual oath of office and give a bond for not exceeding five thousand dollars.