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UNIFORM SYSTEM OF BANKRUPTCY.

property, and be discharged in the event of becoming bankrupt, and creditors will be assured of a pro rata part of estates of their debtors in the event of their failure. The other ninety-nine in each hundred will have no interest in the bankruptcy law, except in so far as they have claims against the estates of the other one, and to the extent that they will be benefited by the deterrent effect which the criminal clauses of the bill will have on dishonest debtors.

The friends of a bankruptcy law contend that when an honest man is hopelessly down financially, nothing is gained for the public by keeping him down, but, on the contrary, the public good will be promoted by having his assets distributed ratably as far as they will go among his creditors and letting him start anew.

The recent financial crisis has crippled so many good, aggressive, useful citizens all over the country that present conditions appeal londly for the passage of a bankruptcy law. But a study of the statis tics which we have submitted will show that in the great struggle of life in this busy country of ours there is each year a large number who fail in business, and in respect to whom the operation of a bankruptcy law would be a blessing directly and an indirect blessing to the community at large.

The enormous increase of our people and the great growth of our institutions, and the added necessity thereby for a national bankruptcy law, will be aptly illustrated by a few examples, as follows:

Population. The following table discloses an increase of 1,236 per cent of our population between 1800 (the date of the passage of the first bankruptcy law) and March 1, 1896:

Year.

Number.

1800

1860

1890

1896 (March 1, estimated by the actuary of the Treasury Department)..

5,308 183 31,413, 21 62,622,250 70, 882, 000

Money in circulation.-From the following table it will be seen that there has been an increase of 100.04 per cent in our money in circulation between 1872 (seventy-two years after the enactment of the first bankruptcy law) and March 1, 1896:

1872..

1896 (March 1).

Year.

Coin and bills.

$762, 721, 565 1,528,742, 037

Coinage and money.-The following table discloses the fact that there has been an increase of 38.80 per cent of the money coined at our mints between the year of the passage of the second bankruptcy law and up to two years ago; that is, 1841 to 1894:

1841.

1867..

1884.

Year.

From the minta.

$2,240, 581. 17 26,557, 411.25 89, 184, 688. 77

UNIFORM SYSTEM OF BANKRUPTCY.

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Telegraph lines.-From the following showing it is apparent that there has been an increase of 311 per cent in the telegraph lines from the date of the passage of the third bankruptcy law up to two years ago:

Telegrams sent.-An increase of 898 per cent in the number of telegrams sent from the date of the passage of the third bankruptcy law up to two years ago is shown by the following table:

Merchandise exports.-The following table discloses the fact that there has been an increase of 741 per cent in the money value of our merchan dise exports from a date of forty-five years after the passage of the first bankruptcy law up two years ago:

Year.

Value.

1845 1867 1894

.....

$106,040, 111 294,506,141 892, 140,572

Merchandise imports.-An increase of 547 per cent in the value of our merchandise imports from a date of forty-five years after the passage of the first bankruptcy law up to one year ago is shown by the following table:

Year.

Value.

1845 1867 1895

$113, 184, 322 395, 761,096 731,969, 965

Revenue of the Post-Office Department.-An increase of 1,884 per cent is shown by the following table in our postal revenues (outside of deficiency appropriations) from a date six years after the passage of our second bankruptcy law, and the year when postage stamps were first used, up to last year:

1847 1895

Year.

Revenue

$3,880, 309. 23 76,983, 128.19

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UNIFORM SYSTEM OF BANKRUPTCY.

Railroads. The following table discloses the fact that there has been an increase of 779,373 per cent in the miles of railroad from a date thirty years after the passage of the first bankruptcy law up to two years ago:

We have had three national bankruptcy laws, but none of them were kept very long on our statute books. The reasons for their repeal may have been the imperfections of the laws or because the people and their institutions were not numerous and large enough to require a bankruptcy law, or there may have been a combination of these reasons, and others already assigned. None of these reasons apply to us now, because we have recommended a bill perfected by our past experiences; our institutions are among the largest on earth, and the people demand its enactment for the protection of their rights.

It has been said that a bankruptcy law would be unjust to debtors; this is denied. It has been said that a bankruptcy law would be unjust to creditors; this statement is equally unsound. Debtors are now liable to their creditors for the amounts due. They would not be liable to them on any other ground under a bankruptcy law. Creditors now have individual remedies against their debtor. Under the bankruptcy law they would have a collective remedy, but only to the same extent.

Under present laws if a debtor is suspected of being in the throes of financial death the creditor who happens to learn of it rushes in with compulsory process and secures a lien on his estate-a lien as against all of the creditors with equal rights. In this particular case it is very advantageous for the lucky creditors, but laws which serve such a man do not result in the greatest good to the greatest number; the bankruptcy law would secure the rights of all the creditors in every case. Again, under the State laws, which is a sharp race of diligence, creditors take chances; they strike early and mercilessly, for fear that some other creditor may get in ahead. With the bankruptcy law proper time can be taken for investigation, as all creditors will know that preferences will not be sustained, and that equity must be done in the distribution of the assets of the insolvent.

It seems clear to the committee that a bankruptcy law is needed to relieve the country of the hopeless debts now resting upon active men, and to keep the business world in a healthy condition from year to year. It will give greater confidence to the commercial and industrial world and remove the tendency to a feverish haste to bounce upon the unfortunate debtor; and we believe that it is a most opportune time for the passage of such a law, because of the present almost paralyzed condition of our business and industries.

The aim of the committee has been to secure the passage of a law which shall guarantee to the people their constitutional rights, and which shall so enforce the edicts of an honest conscience that the law will be retained permanently on the statute books with such amend ments from time to time as may be found to be wise and expedient.

UNIFORM SYSTEM OF BANKRUPTCY.

VOLUNTARY AND INVOLUNTARY BANKRUPTCY.

35

The terms voluntary and involuntary, as applied to a bankrupt, relate only and solely to who filed the petition-that is, if a debtor should file a petition praying to be adjudged a bankrupt, and a decree of the court should be entered adjudging him to be a bankrupt, he would be properly referred to as a voluntary bankrupt; if creditors of a debtor should file a petition alleging that he had committed one or more acts of bankruptcy and the debtor should deny it, and upon a trial the verdict of the jury or the finding of the court should be in favor of the creditors, and a decree should be entered adjudging the defendant a bankrupt, he would be properly referred to as an involuntary bankrupt. As to the rights and responsibilities of bankrupts and their creditors, they are identical in voluntary and involuntary cases. In the debates heretofore had in the House on the subject of bank. ruptcy legislation, those who are opposed to the exercise of the power conferred by the Federal Constitution on Congress to pass a bankruptcy law have frequently incorrectly referred to the right of creditors to proceed collectively against their debtor-that is, to institute involuntary proceedings-as "harsh," "cruel," etc. The gentlemen who have made these allegations were evidently forgetful that the equity and law courts are always open to these identical creditors in their individual capacity, and that suits by such individuals ordinarily result in the failure of the defendant and his final burial beneath a load of indebtedness, the dissipation of a large amount of his property in the payment of needless costs, the liquidating in full of one, two, or three of the claims of the strongest and most alert creditors, while no amount is paid on the claims of other creditors, who in equity and good con science have equal rights with those who are paid in full. If the gen tlemen in question had referred to the present laws under which debtors are needlessly ruined, property wasted, and estates divided between creditors of equal equities, not on an equitable basis but according to who brings suit first, as "harsh," "cruel," etc., they would have stated the case correctly, so far as results are concerned. This is especially true when it is remembered that under State laws the debtor is not discharged from the debts which he can not pay.

Under present laws, when a debtor so acts as to give a ground for attachment or makes default in payments due, there is ordinarily a rush among the creditors, and each one brings a suit on his own account against the debtor, the contention between them being to see who can bring his suit first, with the assured result that while those among the first to sue may collect all or a part of their claims, those not among the first will not receive any part of their claims and will have a bill of costs to pay.

Under the proposed bankruptcy law, only one suit would be brought by or on behalf of all of the creditors. If upon a trial it appears that the defendant had committed an act of bankruptcy, he will be adjudged a bankrupt, and, if honest, will be discharged, and the estate will be equitably and economically distributed to the creditors. The interests of both debtors and creditors will be incomparably better protected under the proposed bankruptcy law than under present laws.

When the bill we recommend with amendments was first introduced in the Fifty-first Congress, there was some opposition to it by members who were opposed to the exercise of the power conferred upon Congress by the Constitution to enact a national bankruptcy law. Later on the majority of such members changed the basis of their opposition-that

36

UNIFORM SYSTEM OF BANKRUPTCY.

is, instead of opposing the enactment of any law, they conceded that oue ought to be enacted, but insisted that it should be only a law for voluntary bankruptcy in the alleged interest of debtors. It appears by the bill now advocated by some that they have changed base once more, and now are not only in favor of voluntary bankruptcy but involuntary bankruptcy for debtors who have been guilty of fraudulent acts.

The principal issue, therefore, at present is not whether we shall or shall not pass a bankruptcy law, as it seems to be practically conceded that we should do so; not whether we should or should not pass a purely vol untary bill which would contract credits and drive a large percentage of debtors in the country into liquidation, because that kind of a bill seems to have been abandoned. But the controversy now, broadly stated, is whether or not we shall pass a bill comprehensive of the whole subject of the rights of fraudulent and insolvent debtors and their creditors, or whether we shall limit it to only fraudulent debtors and their creditors.

After all, the terms debtor and creditor are misleading. There are very few debtors who are not also creditors, and very few creditors who are not also debtors. Great numbers of our best men are, by reason of negotiating new transactions and closing old ones, continually changing from one class to the other. The most numerous creditor class in the country is the one composed of laborers, who continually have a vast amount of wages due them. The largest debtors in the country are the railroads; they owe approximately six times the amount of the national debt. The next largest class of debtors are the banks, which have vast sums of money on deposit, a large percentage of which consists of the savings of the people usually referred to as the poor class.

Every transaction involving credit embodies the rights of at least two persons. On the one hand there is the debtor who receives something; he is usually a well-to-do and oftentimes rich man; the thriftless and very poor classes seldom obtain credit except in a petty way. On the other hand there is the creditor who parts with something; he may be the capitalist or the laborer or a middleman who has heretofore bought on credit what he now sells on credit. The obligations of all the debtors is exactly equal in amount to the claims of all of the creditors. Why, therefore, should we seek to legislate for only one of these classes! The members of both are equal before the law. The rights of each are carefully guarded in the bill we recommend.

THE REAL FRIENDS OF DEBTORS AND CREDITORS.

Our opponents claim, we understand, to be the sole representatives of the insolvent debtors; we contest that claim, and insist that they are, possibly without knowing it but in fact, the worst enemies of such debtors. They do not even pretend to be the friends of creditors. We represent the best interests of not only such debtors, but their creditors as well.

There is an underlying misapprehension in the minds of many of our members who have discussed this question; it is that there is neces. sarily an antagonism between debtors and creditors. As a matter of fact, these relations in the ordinary affairs of everyday life are always assumed voluntarily on the part of both parties, and each one is financially interested, at least, in maintaining a pleasant relationship; each one is in a sense dependent upon the other, and hence neither is interested in personally antagonizing or injuring the other.

The further misapprehension seems to exist that creditors wish to