INSOLVENCY (ante). The distinction between insolvency and bankruptcy, so long observed in England, is unknown in the United States, where the two words are used interchangeably in legal proceedings as well as in ordinary speech. The constitution empowers congress to " establish uniform laws on the subject of bankruptcies th•ough out the United States." The laws of congress made in accordance with this provision have been called bankrupt laws, while those made by the states for the same purpose have generally been called insolvent laws; but this implies no essential difference in the meaning of the Whenever congress passes a bankrupt law, the insolvency laws of the states are thereby superseded. The first U. S. bankrupt law was enacted April 4, 1800, and repealed Dec. 19, 1803; the second, passed Aug. 19, 1841, was repealed in 1843; the third, enacted Mar. 2, 1867, was repealed May 11, 1878. These laws were alike in purpose and spirit, though differing in details. Their object was to discharge insolvent debtors upon the surrender in good faith of all their property. and to divide the same equitably among their creditors. They also provided a method whereby creditors, under certain conditions, could force a debtor into insolvency. The last law was repealed, not so much from any opposition to its main principle, as on account of the alleged needless expensiveness of some of its processes. As debtors and creditors are often citizens of different states, the operation of the state insolvent laws is often attended with much embarrassing and expensive litigation, which can be avoided only by confiding the whole matter to tribunals whose jurisdiction is not restricted by state lines. There are two different processes by which insolvent debtors in many if not all the states of the union frequently obtain their discharge, and these are sometimes pre ferred to a resort to proceedings in bankruptcy. One of these processes is what is known as a voluntary "composition" by the debtor with his creditors, whereby the latter agree to surrender a portion of their claims on condition that the remainder shall be paid. In such cases the parties usually enter into covenant, founded upon a sufficient consideration to make it valid, such covenant being in the form of a "composition deed" in which all the conditions of the bargain are set forth in legal form and under seal. This deed is made void by any subsequent fraud of the debtor in disposing of
his property. The other method of relief is by assignment on the part of the debtor of all his property, to be equitably divided among his creditors. The assignee of the property assumes in law the responsibilities of a trustee, and is held to a faithful per formance of his duty as the administrator of a trust fund. The mode of making such assignments is sometimes specifically regulated by statute. The fraudulent preference of any creditor by a debtor in contemplation of insolvency will, in general, be a sufficient ground for withholding a discharge. In many states the payment of a prior debt within a year of the insolvency proceedings, by a debtor having reason at the time to suppose himself insolvent, will prevent his discharge. Insolvency is either voluntary or involuntary. In the case of the former the debtor himself petitions to be allowed to take the benefit of the insolvency laws and to have a distribution of his property made among his creditors for the payment of his debts; and his petition sets forth the amount of his debts and his inability to pay them. In the case of involuntary insol vency, the creditor's petition that the assets of the debtor may be distributed under the insolvency laws among his creditors, on the ground of fraudulent concealment or con veyance of the debtor's property, or of his failure to dissolve within a certain time an attachment placed upon it. Upon proof of the facts alleged in the petition, it warrant against the debtor's property isssues from the proper authority, judge of probate, master in chancery, or commissioner of insolvency, as the case may be. The officer of the court, or magistrate, thereupon takes possession of the debtor's effects. A meeting of the creditors is then called, and an assignee is chosen to whom the debtor's property is conveyed. He has absolute power over the property, subject to the order of the court, collects debts, makes payments, transfers real estate, calls meetings of the credit ors, etc. In most states, after all the property of the debtor has been applied in pay ment of his debts, he is entitled to a discharge upon consent of a certain percentage of his creditors, according to number or to the amount of their claims.