The provisions under which a man can be thrown into bankruptcy against his will are as follows: (1) where a man has disposed of his property with intent to defraud; (2) where he has disposed of his property to one or more creditors to give a preference to them; (3) where he hasven a preference through legal proceedings; (4) where a man has made a voluntary assignment for the benefit of his creditors generally; (5) where a man admits in writing that he is a bankrupt. The last two provisions are practically voluntary proceed ings. Under the common law a man is con sidered insolvent when he cannot pay his debts when they are due; under the new law he is deemed insolvent only when his property, fairly valued, is insufficient to pay his debts. Only two offenses are cited under the new law; one when property is hidden away after proceed ings in bankruptcy have been begun, and the other when perjury is discovered. Discharges are to be denied in only two cases; one, in which either of the offenses detailed has been committed, and the other, when it is shown that fraudulent books have been kept. The term of imprisonment for either of these of fenses is not to exceed two years.
The law provides a complete system throughout the United States, and for its ad ministration by the United States courts in place of the different systems formerly in ex istence in the various States administered by State courts. In bankruptcy proceedings a bankrupt debtor may turn over all his property to the court, to be administered for the benefit of his creditors, and then get a complete dis charge from his debts. A bankrupt may of his own motion offer to surrender his property to the administration of the United States court and ask for his discharge in voluntary bank ruptcy, or creditors may apply to the court to compel a bankrupt to turn over his property to be administered under the act for the benefit of the creditors in involuntary bankruptcy. The bankrupt who has turned over all his prop erty and conformed to the provisions of the acts is entitled to a judgment of court discharg ing him from any future liability to his cred itors. The State laws relating to insolvency are not affected by this law, but remain in full force and effect.
Extended powers are given by the law for the taking possession and the administration of the assets, among others, to allow and dis allow all claims against bankrupt estates; ap point receivers and take the necessary measures for the preservation and charge of the property of a bankrupt; to arraign, try and punish bank rupts, officers and other persons, and the agents, officers and members of the board of directors or trustees, or other similar .bodies or corpo rations for violation of the act; to authorize the business of the bankrupt to be conducted for limited periods; to cause the assets to be collected and reduced to money and distributed, and substantially determine all controversies in relation thereto; to enforce obedience to lawful orders by fine or imprisonment; and to extra dite bankrupts from one district to another.
As all questions, both of law and fact, in rela tion to the property of the rights of the various parties, must be decided in the bankruptcy pro ceeding, it is provided that referees be ap pointed, who are charged with the duty of hearing the allegations and testimony of all parties, and deciding all such questions as may arise. Each case, as it comes up, is assigned to some referee, whose duty it is to adjudicate and pass upon all such questions arising therein in the first instance, the right being reserved to any parties to appeal from the decision of the referee to the United States District Court. The duties of the referee are substantially of a judi cial character, and he occupies much the posi tion of a judge of primary resort, subject to an appeal of the court, and is required to take the same oath of office as that prescribed for judges of the United States courts.
Provision is made in the act for allowing bankrupts to compromise or settle with their creditors by proceedings known as composi tion proceedings, whereby, if a bankrupt and a majority of his creditors agree upon some basis of settlement, the same, if approved by the court, shall become binding upon all cred itors. The decision of the question as to the approval of compositions and granting dis charges to a bankrupt from his debts is speci fically reserved by the act to the judges of the. United States courts; but the court, by virtue of its general powers, may refer such matters to the referee to take testimony and report to the court his opinion thereon. The aim of the act has been' to make the expense of the pro ceedings depend largely upon the amount of the property involved, and the compensation of the referee is fixed substantially at 1 per cent on the amount distributed to the creditors in ordinary cases, where the assets are distributed by the court, and one-half of 1 per cent in composition cases, and the trustees who have charge of the actual management of the bank rupts property receive as compensation such commissions on accounts paid out by them as dividends as the court may allow, not to ex ceed, however, 3 per cent on the first $5,000, 2 per cent on the second $5,000, and 1 per cent on all sums in excess of $10,000.
Bibliography.— Brandenburg, of Bankruptcy' (3d ed., Chicago 1903); Collier, (Law and Practice in Bankruptcy) (9th ed., Albany 1912); Brandenberg, E. C., Law of Bankruptcy) (3d ed., 1913).