The usual remedy sought by creditors is the ap pointment of a receiver. This officer can then pro ceed to reduce all property to possession and can be gin to straighten things out for the trustee.
10. Trial and reference of proceedings to referee. —After the alleged bankrupt is given a reasonable opportunity to deny that he should be declared a bankrupt, either the petition is dismissed because it has not been sustained by proof, or the decree is signed —either on account of the bankrupt's failure to an swer or because the facts alleged in the petition are found to be sufficient and true. The usual course is the signing of a decree upon default.
The proceedings are then referred to a referee who really has charge of the entire matter from this time on with the exception of the confirmation of any pro posed composition with creditors and the final dis charge of the bankrupt. These proceedings must again come before the court. Referees are appointed by the federal court for a term of two years. They have such intimate relations with all the proceedings that the law provides for at least one referee in each county.
11. Meetings of creditors.—The referee attends all examinations of the bankrupt, declares dividends, re quires the filing of schedules and notifies creditors. His first act is usually to call the creditors' first meet ing at which a trustee is elected by the creditors and the amount of the trustees' bond is fixed. Creditors are often of great assistance to receivers and trus tees in giving suggestions, and it is important that they attend meetings. But they do not run the es tate. The court always retains jurisdiction and in ef fect merely seeks the views of the creditors in order to come to a wise decision. Notices of meetings and other proceedings should be carefully observed and filed away for future reference.
12. Trustees in soon as the credi tors can get together they elect a trustee who takes the custody of the property from the bankrupt or from the receiver. The election of the trustee is usually made on the basis of two votes—one on the per-creditor basis and the other on the per-dollar-of claims basis. If both votes result in the selection of the same candidate his election is usually approved by the referee. If there is a conflict in the results of
the two votes the referee appoints a trustee—usually the person who received the largest number of per creditor votes.
Probably in most cases the selection of the trus tee comes about in the following way: After the pe tition in bankruptcy has been filed, the attorneys for the petitioning creditors ask for a receiver. When the receiver is appointed, application for counsel for the receiver is made and the same attorneys are re tained. Subsequently the receiver is likely to be elected trustee of the estate since he has the claim of be ing familiar with its affairs. Then, upon application for the appointment of counsel for the trustees, the same lawyers are again retained. In this way the matter is practically always under the guidance of the lawyers of the petitioning creditors.
The trustee takes title to the bankrupt's property and does all things necessary, even to the bringing and defending of actions, to conserve the estate for the benefit of the creditors.
13. Duties of bankrupt.—The bankrupt is required to help in the administration of his estate, and he is a wise person who undertakes this task willingly and earnestly. The bankrupt must attend such meetings and submit to such examinations as may be deemed necessary. Indeed, the receiver and the trustee in seeking to discover all the bankrupt's property in order to reduce it to possession may examine not only the bankrupt, but his friends, family and associates. When claims are made against the estate, the trustee usually consults with the bankrupt to see if the claims are valid. Moreover, the bankrupt is required to file schedules of his assets and debts.
14. Schedules.—As was pointed out before, the bankruptcy proceedings include besides the discharg ing of the bankrupt from his debts the gathering up of the assets and the applying of the assets to the payment of liabilities. The schedules in bankruptcy are, therefore, an index to the entire proceedings. They list all the assets and arrange the liabilities in the order in which they will have to be paid.