I-I 



BANKRUPT. 



I'.ANKIU'PT. 



the amount of dividend ncriirrd to bin creditor*. For if hi* effect* will 

 not pay one-half of hi* debt A, or 10*. in the pound, he i left to the 

 discretion of the court and tuignon. to hare a oompetent sum allowed 

 him, not exceeding three per cent, upon the nett produce of bin etato ; 

 but if they pay 10* in tin- pound, he U to be allowed five per cent. ; if 

 12*. d.. then seven-and-a-half per cent ; and if 1S. in the pound, then 

 the bankrupt U allowed too per cent ; provided that Ruch allowance do 

 not in the Ant caw exceed 300L, in the second 400/., in the third SOW., 

 and in the fourth BOW. Beside* thii allowance, he ha* also an indem- 

 nity granted him, of being free and discharged for ever from all debts 

 owing by him at the time he became a bankrupt, and from all claims 

 and demands provable under the bankruptcy, even though judgment 

 shall have been obtained against him, and he lies in prison upon 

 execution for such debt* ; and for that, among other purposes, all pro- 

 ceeding* in bankruptcy are entered of record, as a perpetual bar against 

 actions to be commenced on this Account; though, in general, the 

 production of the certificate, properly allowed, in sufficient evidence of 

 all previous proceeding*. Thus the bankrupt becomes a clear man 

 again. Thus much for the proceedings in a bankruptcy, so far as they 

 affect the bankrupt personally. 



8. Tke Proof of Dfblt by the Crtditort, and the effect f llantruptru on 

 At rvjktt of third parties. Having thus shown the mode in which the 

 trader U declared a bankrupt, and his property and effect* are brought 

 under the control of the court for distribution among his creditors, the 

 verification of the creditors' debts is the next step to be considered. 

 The commissioner, we have seen, is bound to appoint two meetings 

 immediately upon the adjudication of bankruptcy, and at these and 

 every other meeting (with ten days' notice in the ' London Gazette ') 

 appointed for that purpose, the creditors may prove their debts on 

 oath. Corporate bodies may moke proof by an authorised agent, 

 creditor* living at a distance by affidavit, and creditors out of England 

 by affidavit duly verified ; and by a special provision, the person effect- 

 ing a policy of assurance on ships or goods may, though not himself 

 beneficially interested, make proof in case of loss when the person 

 interested is not within the united realm. All debts legally due from 

 the bankrupt at the time of the act of bankruptcy are provable, and 

 also all debt* contracted before the filing of the petition for adjudi- 

 cation, though subsequent to the act of bankruptcy ; provided the 

 creditor, at the time of the debt being contracted, had no htmdedye of 

 any act of bankruptcy. Obligee* on bottomry and respondentia bonds, 

 and the assured in policies of assurance, are entitled to mate claim, and 

 when the loss or contingency happens on which the debt depends, they 

 may then prove the debt and receive dividends with the other creditors, 

 as if the contingency or loss had happened before the filing of the peti- 

 tion ; and all creditors baring claims upon the bankrupt which depend 

 on any contingency may, on application to the court, have a value set 

 upon the contingent claim, and be admitted to prove for the debt thus 

 ascertained. In cases where parties have become bail or sureties for 

 the bankrupt, and have paid the debt or a part thereof (though after 

 the filing of the petition), if the principal creditor has proved the debt 

 under the bankruptcy, such sureties are entitled to stand in the place 

 of the creditor a* to the dividends and all rights under the bankruptcy; 

 or where the creditor has not proved his debt, such surety may prove 

 his demand in respect of the payment be has made, so as not to disturb 

 former dividends of the bankrupt's estate ; and this, although such 

 surety may have become surety for the bankrupt subsequent to the act 

 of bankruptcy, provided he had no notice of any act of bankruptcy 

 when he became surety. With respect to creditors to whom the bank- 

 rupt owe* annuity debts, all such creditors may prove for the value of 

 the annuity, which the court is to ascertain, having regard to the 

 original price given, and to the diminution of value from lapse of time 

 between the granting of the annuity and the date of the petition for 

 adjudication. With respect to interest on debts, the general rule is, 

 that no interest is provable unless interest was reserved by contract, 

 either express, or arising by implication from the usage of trade, or 

 other circumstances attending the origination of the debt ; but interest 

 is provable if the debt was made payable at a certain time by virtue 

 of some written instrument, or if inyable otherwise then from the time 

 of a written demand of payment notifying to the debtor that interest 

 will be thenceforth claimed. Where interest is allowed it is calculated 

 to the date of the petition. 



With respect to proof of debt* against the partners in a firm, the 

 general rules are, 1st, that as a creditor of the whole firm may, if lie 

 please, petition for adjudication against any single partner or any num- 

 ber of partners, he may prove his debt in the same manner ; '2nd, a 

 joint creditor of the whole firm may prove against the separate estate 

 of any one partner who is bankrupt, provided there is no partner who 

 is solvent; but if there is a partner who is solvent, then the joint 

 creditors cannot come into competition with the separate creditors of 

 the partner who is bankrupt ; 3rd, where there are no separate del.t. 

 the joint creditor* may of course prove against the estate of the 

 partner who is bankrupt But for the mere purpose of voting for 

 Msignin, joint creditor* may prove upon the separate estate, although 

 separate creditors cannot upon tin- joint estate. 



If the whole firm Iwcome bankrupt, being indebted to an individual 



r, such partner cannot prove against the joint estate in compe- 



with the joint credit., ; for as they arc hU own creditor* also, 



be ha* no right to withdraw any part of the funds available for the 



payment of their debu ; nor can those partners of a firm who remain 

 solvent prove against the separate estate of a member of that firm in 

 competition with his separate creditors, unless the joint creditors be 

 first paid 20t. in the pound and interest 



There are certain plnsmwi of creditor* which the legislature ha* pecu- 

 liarly privileged. The court is authorised to order that the clerks and 

 servant* of the bankrupt (which includes traveller*) shall receive then- 

 wage* and salary, not exceeding 30V., and for not exceeding three 

 months, out of the estate of the bankrupt ; and they are at liberty to 

 prove for the execs*. In certain instance* the creditor ha* a remedy 

 for his debt without proof. Thus, if the creditor of the bankrupt, at 

 the time of the bankruptcy, owes him money, or if there is mutual 

 crtdit between the creditor and the bankrupt (as, for instance, on lulls 

 or securities not yet fallen due at the time of the bankrupt, 

 creditor is not bound to pay his debt to the estate and prove hi* 

 counter-debt and take a dividend only with the general creditors, but 

 one debt must be set off against the other, and the balance only con be 

 claimed on either side. But in order to be entitled to the benefit of 

 this set-off, the creditor must not have had any notice of the bankrupt'* 

 act of bankruptcy at the time when he gave him credit 



In certain cases, also, where the creditor has obtained a security or 

 lien upon the bankrupt's estate, he is allowed to satisfy himself out of 

 it, instead of being compelled to accept a mere dividend. An extent 

 for a debt due to the crown is still more favourably regarded ; for as 

 that writ binds the goods of the bankrupt from its Itttt (that is, from 

 the date of its issuing), and as the property in the goods does not paw 

 from the bankrupt till the appointment of the assignees, at which time 

 it vests in them, if the crown extent issues before the appointment of 

 assignees, the crown obtains the property ia the goods in preference to 

 the assignees. Other crown process, such as a warrant to levy fur land- 

 tax money, obtains a preference for the crown from the time of the 

 seizure, in case the assignees have not then been appointed. 



A legal mortgage gives the mortgagee a right to retain the property 

 mortgaged until his debt is satisfied, and the assignee of the bankrupt 

 can only redeem it by paying the principal mortgage money, and all 

 interest up to the date of the redemption ; and an equitable mortgage, 

 by mere deposit of title deeds, is in general entitled to the same prefer- 

 ence. A bona fide pledge of personal property stands on the same 

 footing as a mortgage of land, and can only be redeemed by the 

 assignees on payment of the sum advanced. In order however to give 

 such effect to the securities above mentioned, it is necessary that the 

 creditor should have obtained them either before the act of bank- 

 ruptcy, or, if obtained subsequently, that they should have been 

 obtained without knowledge of any prior act of bankruptcy. The 

 situation of the landlord of a bankrupt tenant is peculiar. He has a 

 right to distrain all goods on the premises for his rent, even though 

 the demise itself be not made till after the act of bankrupt* y. If he 

 neglect* his right of distress he must then prove, and come in with the 

 common creditors ; and the distress, if mode subsequent to the act of 

 bankruptcy, is only available for one year's rent up to the filing of the 

 petition, and the landlord must prove the residue of hi* demand like 

 another creditor. 



Assessed taxes, up to the 5th day of April next after the bankruptcy, 

 not exceeding one year's assessment, are to be paid out of the estate. ; 

 and the bankrupt is relieved from further assessment in respect of 

 articles previously kept for trade purposes and duly surrendered and 

 sold under the bankruptcy and not subsequently used. 



When an officer of a friendly society become* bankrupt, monies of 

 the society in his hands ore to be paid over to the society out of his 

 estate in preference to other claims. 



7. Of the Effect of the liankruptcy on the Right* of Third Partiet. 

 The general rule is, that all the property of a bankrupt vests in his 

 assignees for the benefit of the creditors from the time <if the art of bank- 

 ruptcy ; from which it follows that all dispositions made by the bank- 

 rupt of his property after that time ore void a doctrine which 

 occasioned much hardship in many instances to persons who had dc.il t 

 with the bankrupt in ignorance of his having committed an act of 

 bankruptcy, and which has therefore been materially mitigated and 

 qualified by legislative provisions. It is accordingly provided, that all 

 bona fide payment* by or to, and all bona fide conveyances by, and all 

 contracts, dealings, and transactions by and with the bankrupt, made 

 before the filing of the petition for adjudication, and that all executions 

 against the bankrupt's laud bona fide executed by seizure, and all exe- 

 cutions against the goods of a bankrupt bona fide executed and 

 by seizure and sole before the filing of such petition, shall he deemed 

 to be valid, notwithstanding any prior act of bankruptcy, provided the 

 person so paying to or dealing with the bankrupt, or at whose suit 

 such execution issued, had not at the time of so paying or dealing, or 

 at the time of sole under such execution, notice of any prior act of 

 bankruptcy, and also provided that there be no fraudulent preference 

 of any such creditor. This protection is afforded on condition that the 

 party protected has no notice of an art of bankruptcy at the time of the 

 p:>\ MI. nt or dealing, Ac., and consequently no transaction that is itself an 

 act of bankruptcy is thus protected. In order however to deprive the 

 party of the benefit of the act, he must have notice strictly of some act 

 of bankruptcy having been committed. Mere knowledge that the bank- 

 rupt is in embarroMeil cirrtuiiittincr* nt the- time of the payment will not 

 take the case out of the protection of the statute ; ami unless a pet iti. .n 



