BANKRUPT 



575 



BANKRUPT 



was taken up with the fight against the Bank. 

 Jackson finally vetoed a bill to extend its 

 charter, and after his reelection ordered the 

 withdrawal of the government's deposits. The 

 Bank was compelled to wind up its affairs, as 

 practically the whole of its deposits were funds 

 belonging to the United States. W.F.Z. 



For political details of the fight against the 

 Bank, see JACKSON, ANDREW, subhead The Ad- 

 ministration. See, also, BANKS AND BANKING, 

 subhead United States. 



BANKRUPT, a person who is recognized by 

 law as unable to pay his debts. The property 

 of a bankrupt may be seized by his creditors, 

 acting under the orders of the court, and may 

 be divided among them in proportion to the 

 amounts due them. The word bankrupt is 

 derived from the Italian; it really means bank 

 and broken, and refers to the old Italian cus- 

 tom of breaking the benches used by money- 

 lenders and bankers when they failed. In 

 modern times the property of a bankrupt is 

 not destroyed, but merely taken from him. 



Originally, in English law, there was a dis- 

 tinction between bankruptcy and insolvency, 

 and this distinction is still kept in most coun- 

 . A bankrupt must have been a person 

 engaged in business, and only his creditors 

 could petition against him. Persons not en- 

 gaged in business could become insolvent, but 

 only on their own petition. Moo\ern English 

 and American law no longer recognize this 

 distinction, but divide bankruptcy into two 

 B, voluntary and involuntary. A debtor 

 himself may petition for relief from his debts 

 by bankruptcy; this is voluntary bankruptcy. 

 If his creditors petition, it is called involuntary 

 (not voluntary) bankruptcy, even though he 

 offers no protest. A corporation cannot file a 

 voluntary petition, even if it desires to do so; 

 it must always be petitioned against. 



In Canada. l"nd r thr Ilriti>h North Amer- 

 ica Act of 1867 the Dominion Parliament has 

 sole control of bankruptcy, but there is no 

 Dominion law now in force. A Dominion 

 Insolvency Act was passed in 1875, but was 

 repealed in 1880. Its failure was due chiefly to 

 tin- differences in tin- j>r<>\ i:i< -i si 1 i\vs winch 

 txjfore 1867. A \YmdmK-Up Act, 

 winch applies only to banks, insurance and loan 

 companies, was passed in 1882, but in all oth< r 

 respects it has been the policy of tin- Dominion 

 government to leave the regulation of bank- 

 niptrv to thf provinces. In Quebec, where the 

 h civil code is still effective, a debtor 

 may "abandon" his property for the benefit 



of his creditors on one of three conditions: 

 (1) if he has been arrested on a writ of capias 

 (which see) ; (2) if he is in business and is 

 unable to pay his bills; (3) if any creditor, to 

 whom he owes at least $200, demands aban- 

 donment. The abandonment only discharges 

 the debts to the amount which the creditors 

 receive from the estate. 



In none of the other provinces is there any 

 law by which a creditor can compel a debtor 

 to make an assignment of his property. In all 

 of the other provinces, however, the law pro- 

 vides that a debtor may voluntarily assign his 

 property for the benefit of creditors, who may 

 divide it pro rata. Such an assignment does 

 not relieve the debtor from the payment of any 

 unpaid balance. If a debtor refuses to make 

 an assignment, the creditors may secure judg- 

 ments, which are then paid in order of priority. 



In the United States. By the terms of the 

 Constitution Congress has power to establish 

 "uniform laws on the subject of bankruptcies 

 throughout the United States." The individual 

 states are allowed to legislate on the subject, 

 provided the state law conforms to the national 

 statute. The present national act was passed 

 in 1898, and has been several times amended. 

 Petitions in bankruptcy, whether voluntary or 

 involuntary, must be presented to the Federal 

 district court in whose district the alleged bank- 

 rupt lives. The judge may hear the petition, 

 or he may refer it to a referee in bankruptcy 

 or a master in chancery, to take testimony. 

 Final decisions, however, rest with the court. 

 The petition states that the petitioner is un- 

 able to pay his debts and is willing to surrender 

 his property for the benefit of his creditors. 



The Five Acts oj Bankruptcy. The law 

 specifies five classes of acts which justify the 

 court in declaring a person or corporation bank- 

 rupt. Kvrn if a person has committed any of 

 these acts he may prevent a decree against him 

 if he can convince a jury that his property is 

 sufficiently valuable to pay his debts. The 

 five acts are as follows: 



(1) If the debtor conveys or removes, or 

 :i!i..w8 to be removed, any of his property with 

 the intention of defrauding any of his creditors. 

 in Hi.- rnit.-.i States any transfer of property 

 during the four months preceding the filing of 

 a petition In bankruptcy is void, and the prop- 

 may IM- 1 by the creditors. In 

 England the similar period is three months. 



sfers any of his property with 

 the Int. nt ion of preferring any of his creditors. 



(3) If, being already insolvent, that is, un- 

 able to pay his debts, he allows any creditor to 

 obtain a preferred claim through process of law. 



