BANKRUPT, a person publicly declared to be in debt beyond his power of payment. Bankruptcy is distinguishable from insolvency. An insolvent is one who owes more than he can pay; he becomes a bankrupt when that inability is proclaimed by some public or judicial proceeding.
In England one is made bankrupt only by the issuing of a commission under the great seal, which deprives him of all his funds, and vests them in certain commissioners, to be assigned, managed, sold, and divided among his creditors.
In Scotland a person may be made bankrupt either, 1st, by a judicial process called sequestration, analogous to the English commission, by which his estate and effects are taken from him and vested in a trustee, to be managed and divided among his creditors; or, 2dly, by imprisonment for debt, or by absconding, taking sanctuary, or defending himself against the officers sent to arrest him.
The law for regulating bankruptcy has had in view chiefly persons engaged in trade: and the object in both countries has been to preserve the funds of a debtor on the eve of failure from being secreted, or placed in the hands of confidants, or given to favourite relations; to prevent the bankrupt from dealing unequally with his creditors on the eve of his failure; to place his estates and funds under economical management, in order that they may be realised, and the price divided among his creditors; to ascertain the true amount of his debts; to have a fair distribution made at certain terms; and to provide for the safety of the debtor's person, where he has dealt justly with his creditors, and given up every thing fairly for their payment. There is also ingrafted upon this pro-
ceeding, in either country, a mode of stopping short, after Bankruptcy, due inquiry into the amount of the debts and value of the funds, and enabling a certain large majority of the creditors to make an agreement, which shall bind the whole, whereby the proceedings are superseded, immediate payment of part of the debts accepted as a composition for the whole, and the rest of the debt discharged. This is called a composition contract.
Provisions have also been made in both countries for regulating the interests of creditors, and the evil of imprisonment for debt, where the insolvent debtor is not engaged in trade. A short account of the laws established in both countries for regulating both those states of insolvency may be useful.
1. Law of Bankruptcy and Insolvency in England.—
1. Commission of bankruptcy against persons engaged in trade.—The law relating to the bankruptcy of persons engaged in trade is consolidated in one statute, 6 Geo. IV. c. 16. Where a trader or manufacturer either commits certain acts with the intent of defeating or delaying his creditors; or, having been arrested, lies for twenty days in prison; or declares himself insolvent, and gives notice thereof in the Gazette; a commission may, on the petition of a creditor making oath of debt to the amount at least of £100, be issued by the Lord Chancellor under the great seal, appointing certain persons called commissioners of bankrupts to take order and direction with the body of the bankrupt, and his lands, estates, and funds of all kinds, and to make sale thereof for payment and satisfaction to the creditors. Notice is immediately published in the Gazette, and certain days are named, on which the bankrupt is to appear before the commissioners, and be examined in presence of his creditors; and the creditors are to appear and prove their debts, the commissioners having large inquisitorial powers for discovery of the bankrupt's funds. After the creditors have proved their debts, they are empowered to choose trustees, to whom the estate shall be assigned by the commissioners, in order to be sold and converted into money for division; and among the estates and funds so to be assigned are comprehended, 1st, all goods and chattels in the possession, order, disposition, and reputed ownership, of the bankrupt; 2d, all lands, debts, goods, &c. which, after insolvency, and without adequate consideration, the bankrupt shall have conveyed or transferred to his children or others; 3d, all property and effects transferred or affected by contracts or other dealings, or by executions or attachments subsequent to an act of bankruptcy, provided the party concerned have had notice of such act of bankruptcy, or that it shall have taken place within two calendar months of the commission. The assignees are ordered to make dividends among the creditors at certain periods, as the funds shall be realized, notice being given in the Gazette; and the bankrupt may be discharged from all his debts on procuring a certificate signed by a certain proportion of his creditors in number and value, and having it sanctioned by the Lord Chancellor, on hearing any objections which may be stated against the discharge. But no bankrupt can thus be discharged who has lost money at play, or by stockjobbing, to a certain amount; or who has destroyed his books, or made false entries, or concealed his property, or been privy to the proving of fictitious debts on his estate. Finally, the whole proceeding under the commission may be superseded by the Lord Chancellor, if, after the bankrupt shall have passed his last examination, proof shall be given to him of an offer of composition made by the bankrupt or his friends, and acceded to by nine tenths of the creditors in number and value.
2. Insolvency.—Provision has at various times been
Bankrupt—made in England, by occasional or temporary acts, for relieving insolvent persons not within the bankrupt laws, imprisoned for debt. But in 1820 a new court was established for the purpose of affording permanently the means of such relief, 1 Geo. IV. c. 119, and 5 Geo. IV. c. 61. The court consists of a chief and three commissioners, to sit in London, called the Court for relief of Insolvent Debtors. Any person in custody for debt within the walls of a prison in England is entitled to apply to this court, by summary petition, for his discharge from prison, and to have future liberty of his person from all debts due by him at the date of the petition, upon delivering a correct schedule of all his debts, and of all property and assets of every kind, and assigning every thing (except wearing apparel, bedding, &c. to the value of £20), to the officer of the court, for the satisfaction of his creditors; to be by him made over to assignees appointed by the court, to sell and distribute the proceeds. Provision is made for due notice to the creditors, for the investigation of debts claimed, for the proper disposal of all the property, for the duly accounting of the assignees; and all conveyances and preferences given to creditors within three months are declared void. The prisoner's right to a discharge from prison is to be judged of by the court, on hearing the creditors and examining the prisoner; and the court is empowered to discharge him from prison if satisfied with his conduct, or to prolong his imprisonment in their discretion (not, however, exceeding three years), where he has concealed funds, destroyed books, &c. The court has power, where the debtor is not to be discharged, to order the creditor or creditors at whose suit he is detained, to pay to the prisoner a sum not exceeding four shillings by the week, on failure of which the prisoner is to be discharged. To avoid the expense of proceedings in London, the court may order the investigations to proceed in the court-house of the assize-town of the county; one of the commissioners of the court there attending, with all the powers of the court. And the court may appoint examiners to assist in the necessary investigations in counties. A prisoner found entitled to the benefit of the act is not liable to imprisonment for debts due previous to these proceedings, unless he shall succeed to or acquire property, and refuse to assign it to the assignees, for the benefit of his creditors; in which case the assignees may apply to have him remanded to prison; and provision is made for compelling the debtor to submit to examination as to property subsequently acquired.