INSOLVENCY, or BANKRITTCY, is the state of a person declared to be unable to pay his debts. Insolvency is a term which in England bad long been confined to the case of a non-trader who was unable to pay his debts. All who were traders (a term which was not always easily defined) were said, in the same circumstances, to be, not insolvent, but bankrupt. Different courts, called the bankrupt and insolvent courts, were appli cable respectively to these two great divisions of mankind, traders and non-traders, and the chief points of difference in the prochdure were these. In the case of traders, the court of bankruptcy was the court to which they or their creditors applied for its sum mary intervention. That court, whenever a man who was a trader was unable to pay his debts—certain tests of which inability, called acts of bankruptcy, were assumed as infallible symptoms—on the application of a creditor, took forcible possession of his property or his assets of every kind and denomination, converted these into money, and distributed the'produce impartially among the creditors, according to certain rules, at the joint expense of the creditors. In the course of doing this, the court required the bankrupt to state all the property he had, where it was, and to give explanations as to what had been lately lost ; and it was a crime for him to conceal or make away with any part of his property to the prejudice of this impartial distribution. The creditors also came in and proved their debts against his estate, thereby showing their title to share in it. In this way the debtor was entirely stripped of everything (with a few trifling exceptions) which he had, and which was salable; and, on the other band, lie received a certificate which entirely cleared hint of the incumbrance of his past debts for ever— freed him not only from imprisonment, but even from the liability to pay more in fu ture, should he afterwards become rich; and he could thus begin the world anew.
On the other hand, the non-traders, who consisted of country gentlemen, professional men, gentlemen at large, aad nondescripts of every degree who were not traders, fell under the care of the insolbent court. These non-traders petitioned the court voluntar
ily, instead of their creditors doing so, as was the case in the bankrupt court, and they of course put off this application till the last. when they were in prison, though they might also petition before any creditor put them in prison. The sole condition on which the insolvent court granted them its protection, and discharged them from prison, was, that they should not only give up all their property, but state fully all the debts and liabilities they had incurred. If they did this satisfactorily, the court relieved them from imprisonment, which was the most obnoxious of their terrors, but did not entirely free them from the debt they had incurred. On the contrary, they were still liable for their debts; and if ever they should in future become rich enough to pay twenty shillings in the pound, they were still held liable to make up that amount. This contingency, however, seldom happened, and. moreover. when it did happen, consider able leniency was shown to the debtor, so that practically, both in bankruptcy and in solvency, the debtor was more or less whitewashed, and was at least saved from im prisonment.
Important changes were made in the practice of bankruptcy by the act of 1869, 33 and 34 Vict. c. 71, which repealed the prior enactments and rendered the law more uniform. Under that act non-traders as well as traders may be made bankrupts; and even peers of the realm not only may be made bankrupt, but, on being declared so, are at once dis qualified from sitting and voting in the house of lords till they lave received their dis charge. The act 54 and 35 Vict. c. 50, provided that the moment a peer is adjudged a bankrupt his disqualification begins, and he commits a breach of privilege if he sits er votes, or attempts to do so, while thus disqualified. And if be is a representative peer, a new election must take place when he becomes bankrupt.