BANKRUPT. Originally and strictly, a trader who secretes himself or does certain other acts tending to defraud his creditors. 2 Bla. Com. 471.
A broken-up or ruined trader. Everett v. Stone, 3 St. 453, Fed. Cas. No. 4,577.
By modern usage, an insolvent person.
A person who has done or suffered to be done some act which is by law declared to be an act of bankruptcy.
The word is from the Italian banca rota, the custom being in the middle ages to break the benches or counters of merchants who failed to pay their debts. Voltaire, Dirt Phil. voc. sig. Banqueroute ; Saint Bennet Diet. Faillete.
In the English law there were two char acteristics which distinguished bankrupts from insolvents : the former must have been a trader and the object of the proceedings against, not by, him. Originally the bank rupt was considered a criminal; 2 Bla, Com. 471; and the proceedings were only against fraudulent traders ; but this distinc tion has been abolished by the later English bankruptcy acts, although in some respect; traders and non-traders continued to be put on a different footing; Mozl. & W. Law Diet. As used in American law, the distinction between a bankrupt and an insolvent is not generally regarded. Act of Congress of March 2, 1867, and Act of June 22, 1874 (both now repealed). On the continent of Europe the distinction between bankrupt and insolvent still exists ; Holtz. Eneyc. voc. sig. Bankerott. Under the constitution of the United States the Federal government has power to pass a uniform bankrupt law. The meaning of bankrupt as used in the consti tution was not the technical early. English one, but was commensurate with insolvent; Kunzler v. Kohaus, 5 Hill (N. Y.) 317, In the first bankrupt law of Apr. 4, 1800, re pealed Dec. 19, 1803, the word bankrupt was used in the old English sense. The distinc tion, however, became less observed; Mar shall, C. J., in Sturges v. Crowninshield, 4 Wheat. (U. S.) 122, 4 L. Ed. 529; 2 Kent 390 ; and was finally abandoned and broken down by the act of Aug. 19, 1841, which was a union of both species of laws, including "all persons whatsoever." The constitutionality of the voluntary part of the act was much contested, but was fully sustained; Kunzler v. Kohaus, 5 Hill (N. Y.) 317; McCormick v. Pickering, 4 N. Y. 283. (For the reasons assigned contra, see Sackett v. Andross, 5 Hill [N. Y.] 327.) The only substantial difference between a strictly bankrupt law and an insolvent law lies in the circumstance that the former affords relief upon the application of the creditor, and the latter upon the application of the debtor. In the general character of the remedy there is no difference, however much the modes by which the remedy may be administered may vary. But even in the respect named there is no difference in this instance. The act of congress (1867) was both a bankrupt act and an insolvent act by definition, for it afforded relief upon the application of either the debtor or the creditor, under the heads of voluntary and involuntary bankruptcy ; Martin v. Berry, 37
Cal. 222.
A state has authority 'to pass a bankrupt law, provided such law does not impair the obligation of contracts, and provided there be no act of congress in force to establish a uniform system of bankruptcy, conflicting with such law; McMillan v. McNeill, 4 Wheat. (U. S.) 209, 4 L. Ed. 552; Odgen v. Saunders, 12 Wheat. (U. S.) 213, 6 L. Ed. 606.
A state bankrupt law so far as it attempts to discharge the contract is unconstitutional ; McMillan v. McNeill, 4 Wheat. (U. S.) 209, 4 L. Ed. 552; Sturges v. Crowninshield, 4 Wheat. (U. S.) 122, 4 L. Ed. 529 ; Farmers' & M. Bank v. Smith, 6 Wheat. (U. S.) 131, 5 L. Ed. 224; whether passed before or after the debt was created; McMillan v. McNeill, 4 Wheat. (U. S.) 209, 4 L. Ed. 552; or where the suit was In a state of which both parties were citizens, and in which they resided until suit, and where the contract was made ; Farmers' & M. Bank v. Smith, 6 Wheat. (U. S.) 131, 5 L. Ed. 224; but a bankrupt or insolvent law of a state which discharges the person of the debtor and his further acquisitions of property is valid, though a discharge under it cannot be pleaded in bar of an action by a citizen of another state in the courts of the United States or of any other state; Odgen v. Saunders, 12 Wheat. (U. S.) 213, 6 L. Ed. 606. Every state law is a bankrupt law in suhstance and fact, that causes to be distributed by a tribunal the property of a debtor among his creditors; and it is especially such if it causes the debtor to be discharged from his contracts, so far as it can do so; Nelson v. Carland, 1 How. (U. S.) 265, and note, 11 L. Ed. 126. When the United States statute is also an insolvent law acting upon the same persons and cases as the state insolvent law, the latter is suspended when the United States statute goes into operation ; Nelson v. Car land, 1 How. (U. S.) 265, 11 L. Ed. 126; Ex parte Eames, 2 Sto. 326, Fed. Cas. No. 4,237, but the state law may be still in force as to a class of insolvents not included in the Fed eral act; Herron Co. v. Superior Court, 136 Cal. 279, 68 Pac. 814, 89 Am. St. Rep. 124. If the state court has acquired jurisdiction under a state statute, and is actually set tling the debts and distributing the assets of the insolvent before or at the date at which the Federal law takes effect, it may proceed to a final conclusion of the case; Judd v. Ives, 4 Mete. (Mass.) 401; Martin v. Berry. 37 Cal. 208. A voluntary assignment made by the debtor within four months of being adjudged a bankrupt is void although it was made in conformity to the laws of his state; In re Gutwillig, 90 Fed. 475. See INSOL VENCY.