BANKRUPT (banque-routier, a bank rupt, and banque-route, bankruptcy—from Lanus, the table or counter of a trades man, and ruptus, broken) is a merchant or trader whose property and effects, on his becoming insolvent, are distributed among his creditors, under that system of statutory regulations called the Bankrupt Laws. These laws, which originated in England with the statute 34 & 35 Henry VIII. c. 4, were first mainly directed against the frauds of traders, who ac quired the merchandise and goods of others, and then fled to foreign countries, or lived in extravagance, and eluded and defrauded their creditors. The bank rupt was consequently treated as a crimi nal offender ; and until within a few years, the not duly surrendering his property under a commission of bank ruptcy, when summoned, was a capital felony. The bankrupt laws are now, and have for some time past, been regarded as a system of legislation, having the double object of enforcing a complete discovery and equitable distribution of the property and effects of an insolvent trader, and of conferring on the trader the reciprocal advantage of security of person and a discharge from all future claims of his creditors. These laws were till lately spread over a voluminous accumulation of statutes, referring to and depending on each other, and often creating confusion and inconvenience from their diffuse and contradictory provisions. These statutes were, under the auspices of Lord Elden, repealed, and their provisions altered and consolidated into the 6 Geo. IV. c. 16, which introduced important alterations and simplifications.
The 1 & 2 William IV. c. 66, consti tuting " the Court of Bankruptcy," mate rially changed the mode of administra tion of this law; it entirely removed the jurisdiction in the first instance in cases of bankruptcy from the Court of Chan cery to the new Court of Bankruptcy, reserving only an appeal from the Judges of that court to the Lord Chancellor, as to matters of law and equity and questions of evidence. Instead of the commission under the Great Seal, which formerly issued to a certain number of barristers-at-law who were permanent "Commissioners of ltankrupt,"the above Act substituted a fiat of bankruptcy; and other important alterations were also in troduced.
These statutes, however, aided by several subsequent acts, have proved inadequate to the protection of mercan tile credit, and the great bulk of bank rupt assets, leaving very small dividends to creditors, were found to disappear by the concealment of property, colourable sales, secret transfers, and other fraudu lent devices. In consequence, the state of this branch of the insolvent laws con tinued to be sedulously pressed on the attention of parliament by the leading merchants of London and Manchester, and the result of their urgent represent ations of the immense losses the trading world annually suffered (fifty millions per annum was the alleged amount) from unprincipled bankruptcies, has been the " Bankrupt Consolidation Act, 1849."
The new act commenced October 1st, 1849, and effects very marked improve ments on the pre-existing system.
Among the amendments of the Act the following may be distinctly enume rated. 1. Those relating to insolvent debtors, which facilitate an honest sur render of their property. 2. Those relating to creditors, which increase their control over the persons or pro perty of their debtors. Lastly, provi sions to increase the general efficiency of the Court of Bankruptcy, by augment ing its primary jurisdiction, and thereby saving the delay and expense of appeals to the Lord Chancellor.
The improvement in the law effected by the Consolidation Act relating to the conduct of debtors, is probably of greater importance to society and the morality of trade, than any other portion of it. For the first time, a broad distinction has been drawn by law between honest and fraudulent debtors.
Traders who at an early period of their insolvency place their affairs before their creditors, and obtain their assent (in one case of three-fifths, and in an other of six-sevenths, in number and value) to such proposals as they are able to make, can obtain protection for their persons, and can wind up their affairs either by trustees, without the interference of the Court, or under the control of the Court, with the aid of an official assignee ; but in either case with out the stigma of bankruptcy, or having their affairs revealed in open court. If, however, bankruptcy cannot be avoided, then, after hearing the case and judging of the conduct of the bankrupt during his examination, it is left to the Com missioners of the Court to grant either a first-class certificate, which declares the trader's inability to pay his debts has arisen from misfortune only, or a second class, in which it is declared to have arisen partly from misfortune; or a third class, in which it is declared not to have arisen from misfortune. These provi sions, it has been anticipated, will be sufficient to induce in many cases a much earlier surrender of property to creditors than has been heretofore prac tised, and will also relieve an unfortu nate man, driven by a vindictive creditor, from that disgrace which has attached indiscriminately to all.