Under the present bankruptcy acts in England and in the United States, proceedings in bank ruptcy may be instituted by the debtor or by creditors. The former is called a voluntary, the latter an involuntary, proceeding. Each is begun by filing a petition. The debtor's petition must state that he is unable to pay his debts, and is willing to surrender all of his property to the use of hiscreditors. Whether a person is liable to be adjudged a bankrupt upon the petition of creditors does not depend upon his ability or in ability to his debts, but upon his having committed an act of bankruptcy. Such at least is the English doctrine; but it is modified to some extent in the United States. The United States Bankruptcy Statute of 1898 enumerates five classes of acts of bankruptcy: First, convey ing, transferring, concealing, or removing, or permitting to he concealed or removed, any of his property with the intent to hinder, delay, or defraud any of his creditors: second, transfer ring, while insolvent. any of his property with intent to prefer a creditor or creditors over others: third, suffering, while insolvent, any creditor to obtain a preference through legal proceedings, and not securing the vacating or discharge of such preferenee: fourth, making a general assignment for the benefit of creditors; fifth, admitting in writing his inability to pay his debts, and his willingness to he adjudged a bankrupt on that ground.
After the debtor is adjudicated a bankrupt, a trustee is appointed by the creditors (subject to some supervision by the Board of Trade in Eng land, by the bankruptcy court in this country), who becomes vested not only with all the prop erty in possession of the debtor at the time when he was adjudged a bankrupt, but with all that he had transferred in violation of the statute or ill fraud of creditors. It is quite important that the trustee's title should relate back of the ad judication. Otherwise a failing debtor could al ways defeat one of the main purposes of the bankruptcy statute—that of securing a ratable division of all his estate among all his creditors ---by turning over his property to one or more favored cm-editors. By providing for the relation back of the trustee's title, every transfer of his property made or suffered by an insolvent debtor, with intent to prefer a creditor over others, with in three months in England, four months in the United States, before the filing of the petition in bankruptcy, is rendered invalid, prop erty may be brought hack into the estate for division among creditors. :Mo•eover, even when a creditor has obtained security from the debtor, which is not invalidated by the statute, he is not allowed to share in the bankrupt's estate unless lie turns over the security to the trustee. It is the duty of the bankrupt to make a full disclos ure and surrender of his property, save such as is exempted by statute, as well as to supply a full and honest list of his creditors. Upon estab lishing their claims, in the prescribed manner, the creditors are entitled to take part in the meetings provided for by statute, as well as to receive dividends. if time bankrupt's business conduct has been honest and legal he is entitled to a discharge from all provable debts, with few exceptions. He may be punished criminally for certain violations of the bankruptcy law; and a discharge from debts will be denied for various reasons. Under the present Federal statute it will be denied if he has committed an offense punishable by imprisonment, as provided therein, or if lie has fraudulently destroyed, concealed, or failed to keep books of account, or records, show ing his true financial condition. The English act gives to the court a much more extended disci plinary jurisdiction over bankrupts. It provides for a searcldng investigation into their conduct and affairs prior to, as well as during, the pro ceedings, and gives to the court a very large discretion in granting,, denying, or conditionally withholding a discharge. Even when a discharge
is obtained, it does not relieve the bankrupt, as a rule, either in England or here, from debts grounded in fraud or other moral misconduct. In this country no political disability follows an adjudication in bankruptcy. In England, how ever, an adjudged bankrupt is disqualified from sitting or voting, in either house of Parliament, or from holding various other specified offices. This disqualification ceases as soon as the bank rupt is discharged, if the eou•t certifies that lie was free from misconduct, and at the end of five years from a discharge in other cases.
Article I., Sec. S, of the Federal Constitution, gives to Congress power "to establish . . uniform laws on the subject of bankruptcies throughout the United States." This grant of power to Congress does not exclude the States from 'legislating on this subject ; but a Federal bankruptcy statute duet suspend, while in force, the operation of a State statute covering time same ground. Congress has exercised this power but sparingly. It passed the first bankruptcy law in 1800. This was copied quite closely from the English statute of that time. As it applied only to traders, it soon became unpopular with other classes, and was repealed in 1803. The next venture in bankruptcy legislation by con. gress was made in 1841, at the request of in solvent debtors, who, after the panic of 1837, had become a numerous and influential class, This bill proved no more satisfactory than its predecessor, and it was repealed after a short life of two years. After the repeal of this act no serious attempt was made to pans a Federal bankruptcy law until 1864, when Congressman Jencks, of Rhode Island, introduced a bill upon this subject. Ilis very instructive speech, ex planatory of its purpose and provisions. is Con tained in the Congressional Club(' for 1563-64. at page 2636. The bill met with serious opposi tion, and did not become a until June, 1867. In 1874 it was amended in various respects. One of the changes required one-fourth in num ber and one-third in value of the creditors to unite in an involuntary petition. This made it very difficult for creditors to force a debtor into bankruptcy, and thereafter the proceedings were mainly voluntary. Moreover, the charges upon bankrupt estates under this law were heavy. often exorbitant, and the creditor clats was dis appointed in its workings. Their agitation for its repeal was crowned with success in 1878.
Twenty years elapsed before the fourth and present act was paseed by CongresA. It was the outcome of a compromise between the friends of a bill fashioned largely after the present English statute, and those who were either opposed to any Federal legislation on the subject. or were anxious to limit such legislation within the nar rowest possible bounds. Its definition of acts of bankruptcy is much narrower than that of the English statute. Even one who has committed an act of bankruptcy may defeat an adjudication by convincing a jury that the aggregate of his property is. at a fair valuation, sufficient in amount to pay his debts. Its provisions relating to a discharge are very lax, as has been pointed out already. It secures, however, a fairly ex peditions, convenient, and economical adminis tration of bankrupt estates. While the Federal district courts have original jurisdiction in bankruptcy, the statute provides for referees, who may perform many of the judicial duties in bankruptcy proceedings, and whose districts are not to extend, as a rule, beyond the limits of a single county, thus making it easy and inex pensive for suitors to attend court. Consult: Brandenburg, Law of Bankruptcy (2d ed., Chi cago, 1901) : Bump. Law and Practice in Bank ,uptcy (11th ed., Washington, 1898) : Baldwin, Concise. Treatise Upon the Law of Bankruptcy (8th ed., London, 1900) : Robson, Treatis, on the Law of Bankruptcy (7th ed., London, 1894),