II. Law of Bankruptcy and Insolvency in Scotland.—1. Bankruptcy of persons engaged in trade.—By 54 Geo. III. c. 137, a judicial proceeding, called sequestration, is authorized to be issued by the Court of Session, on the petition of an insolvent trader or manufacturer in Scotland, with concurrence of a creditor swearing to a debt of £100, or of a creditor to that amount without the concurrence of the debtor, provided the insolvency have been followed by imprisonment, absconding, or taking sanctuary, or by the execution of certain judicial warrants, if he be privileged from arrest. By this process the whole estates and effects of the debtor, real and personal, are placed under sequestration, to the effect of being made over to a trustee, as soon as the creditors can meet and choose a fit person; for which purpose a day is appointed, and notice given in the Gazette. The property is in the meanwhile managed by a factor, appointed by the creditors; and the trustee, when chosen, has the whole property assigned to him, and is entitled to recover, for the benefit of the creditors, all property and effects made over to confidential persons after insolvency, or conveyed to creditors in satisfaction or security of previous debts, within two months before sequestration or imprisonment. The
trustee's duty is to bring the whole estate to sale, with certain precautions; to receive and investigate the claims of the creditors, and to reject or admit them, subject to review of the Court of Session by summary petition. At certain appointed times he is required to make successive dividends, till the whole funds shall be exhausted. The debtor and his family must submit to public examinations on oath before the sheriff of the county in which his trade was carried on; and he may receive a judicial protection from arrest, if four fifths of his creditors in number and value shall think him entitled to it, and the trustee shall certify his conduct to be unexceptionable. And on the same conditions he may, after a certain time, be discharged of all his debts by the court, after hearing any creditor in opposition. The whole may also be superseded by composition, if (after the examinations as to the funds, and the lapse of sufficient time for the creditors to appear) a proposal of composition shall be made by the bankrupt, and assented to by nine tenths of the creditors in number and value: the court may judicially sanction it by discharging the bankrupt of all his debts on payment of the composition.
2. Bankruptcy of persons not engaged in trade.—By a statute in the end of the seventeenth century (1696, c. 5) the Scottish parliament provided, that any person insolvent and imprisoned upon caution, or taking sanctuary, or absconding, or defending himself by force against arrest, shall be deemed a bankrupt; and the effect of this is, 1st, that no preference given to one creditor over others within two months previous to the bankruptcy shall be effectual; 2d, that all attachments of goods, debts, &c. within the same term shall be unavailing to give preference to the creditor using them; 3d, that the debtor may apply to the Court of Session to be discharged from prison, after a month's imprisonment, on making a complete cessio bonorum, or surrender to his creditors of all his estates and effects; the court having power to judge of his right to such discharge, and to prolong his imprisonment (or rather to refuse his discharge), according to his conduct. His future acquisitions are liable to be attached by his creditors.