Soon after adjudication of bankruptcy, a ten days' notice is given in the Gazette to the creditors to meet and appoint a trustee. On this occasion, the creditors must first prove their debts, which they do by their affidavit or oath, together with production of any security or document verifying the debt. All creditors having thus proved their respective debts, have power to choose one or more persons as creditors' trustees; but the court has power to reject for want of security. The creditors may be represented on such occasion by an agent or deputy, whose authority needs no stamp. Creditors may determine whether such trustees shall give security. The court declares the appointment final. From the moment of their appointment, the whole of the bankrupt's real and personal property of every kind vests in them. They can sell it, and in general do every thing which the bankrupt himself could have done. They are accountable to the creditors, and must render frequent accounts, and give explanations,which accounts must be printed and sent to every creditor. They manage and realize the estate and collect the debts, and can compromise claims and sue if needful. The court can summon the bankrupt, his wife, and all persons for examination. A sitting is appointed for every examina tion of the bankrupt which the court or the trustees may deem necessary. Meanwhile all creditors who have debts must complete the proof. Every creditor may prove his debt by delivering or sending through the general post, to the official registrar—or, if the creditors' trustee has been appointed, then to the latter—a statement of such debt, and of the account of any, and a declaration signed by such creditor appended thereto that such statement is a full, true, and complete statement of account, and that the debt is justly due. If the debt is undefined, and consists of unliquidated damages, then the court orders a jury to be impaneled, either before itself or a court of law, to fix the sum. Debts which have been incurred, but are payable at a future time, may also be proved, and so may contingent debts and liabilities. When wages are due to clerks and servants at the time of the bankruptcy, the court may order a sum not exceeding four months' wages, and not exceeding £50, to be paid in cash; and for any surplus that may be due, the clerk or servant must prove and share with the other creditors. If the other creditors oppose a particular debt, and show it is unfounded, the court will expunge it. When all the examinations necessary of the bankrupt have been gone through, a fliy is appointed for considering his discharge. A discharge shall not be granted unless it is proved to the court that a dividend of ten shillings in the pound has been paid, or might have been paid, except through the negligence or fraud of the trustee; or that a special resolution of creditors has been passed to the effect that the failure to pay ten shillings in the pound has arisen from circumstances for which lie was not responsible, and that they desire that an order of discharge shall be granted to him. And the eosin may suspend for a time, or withhold altogether, the order of discharge. if the creditors, by special resolution, have decided that the bankrupt has made default in giving up to his creditors all the property required by the act to be given up, or that a prosecution has been commenced against him for some fraudulent offense declared by the debtors act of 1869, 32 and 33 Viet. c. 62. The effect of the discharge is to free the bankrupt entirely from all debts capable of being proved under the bankruptcy. The creditors have it in their power to determine whether any and What allowance should be made to the bankrupt up to and open his discharge.
'A debtor who is unable to meet the demands of his creditors may, instead of leaving them to commence proceedings in bankruptcy, call them all together, and lay a state ment of his affairs before them, when those present are to decide whether the estate shall he wound up by arrangement. Due notice of this must, however, have been given to all creditors whose debts exceed £10. The debtor must also attend and answer all questions. If the majority of creditors agree, they may thus liquidate the estate by arrangements, and they proceed somewhat in the trimmer ustuil in bankruptcy by appoint ing a trustee; and there is power, in case of any legal or other difficulties, to call on the court to adjudicate the debtor a bankrupt in the usual way; and in all cases the proceed ings are under the surveillance of the bankruptcy court.
The criminal offenses committed by a bankrupt are such as not surrendering himself to the jurisdiction of the court at the time appointed; not making a full discovery of all his property and his dealings with it; concealing or embezzling part of his property above £10; not informing his trustee of any false debt proved under his bankruptcy; falsifying his books; fraudulently accounting for his property by fictitious losses; pawn ing or males fide disposing of property within three months before the bankruptcy.
In Ireland bankruptcy is substantially the same process in all its features as in England.
Scotch bankruptcy, or sequestration, is substantially the same process as that which prevails in England and Ireland; but there are some differences of no small importance, besides the different names given to the steps of the process. Certain acts and conduct of the bankrupt are held to be symptoms of notour bankruptcy, corresponding to what are called in England acts of bankruptcy. The first step is a petition for sequestration, which may be presented by creditors whose debt must be of the same amount as in England. There is no separate court of bankruptcy, but the teheriff of the county, or the court of session, has jurisdiction to award sequestration, and the court then,appoints a judicial factor, if necessary, until the creditors elect a trustee, in whom the property vests. The creditors also appoint commissioners to advise with the trustee as to the management of the estate. The duties of the trustee and commissioners are nearly identical with those of the trustee in England. The creditors prove their debts in a similar way. There are also powers of winding up the estate under a deed of arrange ment. The whole procedure in the sequestration has been very much imitated in the latest statutes passed in England. The commissioners of the creditors fix the trustee's remuneration. The trustee examines the grounds of claim of creditors, there being an appeal to the lord ordinary or sheriff, and he examines the bankrupt on oath, if neces sary. On a report from the trustee as to the conduct of the bankrupt, which is not demandable by the bankrupt till five months after the sequestration, the bankrupt petitions for his discharge, and if the creditors all concur, be is entitled to his discharge at once; at later dates, if he has the concurrence of a certain number of his creditors, he is also entitled to a discharge; but if the creditors oppose, the court has a discretionary power to grant or suspend the discharge with or without conditions. In Scotland there is no distinction, as there was once for many purposes in England, between traders and non-traders. Another peculiarity of a Scotch sequestration is, that the pro cess is applicable not only in the case of debtors who are alive, but in cases of persons who have died in insolvent circumstances; whereas in England the only remedy is an administration suit in the court of chancery. In Scotland there is a process called cessio bonorum, which resembles the process called insolvency in England, the principle of which is, that the debtor is only relieved from imprisonment, but not from the debt; and where the debtor has trifling assets, it is in the power of the creditors to resolve that their debtor shall not have a discharge under the sequestration, but only a decree in a cessio bonorum (q.v.).
With regard to the effect of a discharge under a bankruptcy in either of the three kingdoms, the rule is, that whether the bankruptcy is awarded in England, Ireland, or Scotland, all the property of the bankrupt vests in the assignee or trustee, wherever it is situated; and when the bankrupt is discharged, the discharge is thereafter complete and given effect to in all parts of the United Kingdom. Of late years, owing to the belief that it was much easier to be made a bankrupt, and obtain a discharge front debt, in Scotland than in England, various English debtors resorted to Scotland for forty days, in order that they might be made bankrupt, no doubt thinking that creditors would be less likely to oppose their discharge at that distance; and after their discharge, they returned to England and pleaded this Scotch bankruptcy. But a recent statute has given power to the Scotch courts to refuse the remedy of sequestration to debtors whose debts were chiefly contracted in England, and to remit them to their own country.