BANKRUPTCY is the status of a debtor who has been de clared by judicial process to be unable to pay his debts. Bank ruptcy and insolvency, although sometimes used indiscriminately, have in legal usage distinct significations. When a person's finan cial liabilities are greater than his means of meeting them he is said to be "insolvent." A debtor may be insolvent without becom ing bankrupt, but he cannot be a bankrupt without being insol vent ; for bankruptcy is a legal declaration of his insolvency and operates as a statutory system for the administration of his prop erty, which is thereby taken out of his personal control.
The primary objects of bankruptcy legislation are to obtain justice while not pressing unduly on debtors, to discriminate be tween involuntary inability to meet obligations and wilful refusal or neglect, and to secure to creditors as between themselves an equitable share of such of the debtor's assets as may be available for the payment of his liabilities. Another object has marked recent legislation, namely, the fostering of a higher tone of com mercial morality and the protection of the trading community at large from the evils arising through the reckless abuse of credit and the unnatural trade competition thereby engendered. Credi tors have conflicting interests as between themselves, and are therefore incapable of acting together as a homogeneous body. Hence the necessity for calling in the aid of professional assignees or trustees, solicitors and other agents, who make it their special business to deal with such matters, exercising both administrative and quasi-judicial functions, in return for the remuneration which they receive out of the property for their services.