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had been doubted whether such machinery, practices, and exceptions. were properly within the purview and under the sanction of the section, and more recently the appellate courts have disapproved of them. Thus even under the expanded scope of relief afforded by section 74, an effective settlement for wage earners is still unprovided for.

It may be of interest to note that wage earners constitute over 50 percent of all bankruptcy cases. The vast majority of wage earner cases follow upon the garnishment of wages, a right which exists in many States. Where the Bankruptcy Act has been invoked by a wage earner, it has been for the purpose of obtaining a discharge and not for the purpose of securing a satisfactory arrangement for payment. But the average wage earner, like every other type of debtor, desires to pay his debts and to avoid the "stigma" of bankruptcy. If afforded a reasonable opportunity he would preferably arrange to do so. (See S. Doc. No. 65 (72d Cong., 1st sess.), Strengthening of Procedure in the Judicial System, 80-86 (Government Printing Office, 1932).)

In response to a growing and pressing demand for a wage-earner proceeding, a bill providing for it was introduced in the first session of the Seventy-fourth Congress, H. R. 6140. Therein was set up a special proceeding for dealing with settlements by wage earners. With some relatively unimportant changes, a substitute bill was introduced (H. R. 11219) in the second session of that Congress. Chapter XIII, in the main, is a recast of H. R. 11219. Its provisions, as far as necessary, have been conformed to the like provisions of chapter XI.

Proposed relief.

The relief provided is predicated upon the primary concept that the wage earner is to effect a settlement out of his future earnings. Settlement has been provided with the unsecured creditors generally, as well as with the secured creditors individually, upon any terms; that the unsecured creditors be dealt with as a class, and that the acceptance of a plan by them be by a majority in number and amount of their claims; but in the case of the secured creditors, that each be dealt with individually, since the secured creditors of a wage earner will always be single persons, as distinguished from a class, each holding a particular security. The provision for so dealing with the secured creditors is made necessary by the decision of Louisville Joint Stock Land Bank v. Radford (55 S. Ct. 854, 28 A. B. R. (N. S.) 397). Since it is not essential to or a proper part of a plan of settlement, debts secured by real property or chattels real, such as mortgages and the like, are not covered.

It is a mandatory provision of every plan that the wage earner shall submit his future earnings to the supervision and control of the court, in order to secure the enforcement of the plan, but both the wage earner and his creditors are protected against unforeseen changes in the circumstances of the former, by making it a permissive provision of the plan that the court be vested with the power to modify the amount and time of payments as provided in the plan. The rejection of executory contracts by the wage earner is also provided for. This is a necessary provision and conforms with a like provision in the other new chapters.

Particular attention has been given to the costs and expenses of the proceeding, to the deposit thereof, and to the deposit of cash for priorities. It is provided that the commissions to the referee and the

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trustee shall be payable only upon the actual periodical payments as and when made. By the simplification of the proceeding the costs and expenses have been held to a minimum. The only deposit required is that of the referee's indemnity of $15 for his costs. All other costs and expenses, as well as the cash for priorities need not be deposited unless, and to the extent, provided for by the plan.

TAX PROVISIONS FOR CHAPTERS X, XI, XII, AND XIII

Section 199 of chapter X contains in virtually identical form, the provision in section 77B of the act authorizing the Secretary of the Treasury-where the United States of America is a creditor or stockholder of the debtor-to accept or reject a plan in respect of the claims or rights of the United States. Section 266 to 270, inclusive, of the chapter, contain additional tax provisions designed not only to protect the interests of the United States Government in reorganization proceedings but also to expedite those proceedings and express a policy with regard to the determination of taxable income of the debtor corporation.

In section 266 the clerk of the court is directed to transmit to the Secretary of the Treasury such copies of petitions, answers, orders, applications, and other papers as would be needed to give the Treasury Department full notice of all developments in the proceeding. Section 269 authorizes the Secretary of the Treasury, or a corresponding official of a State, to object to the confirmation of a plan where it appears that a plan has for one of its principal purposes the avoidance of taxes. Section 270 provides that the debtor or the corporation organized under the plan shall be liable for all taxes which may be found to be owing to the United States or any State within 1 year from the date of the filing of the petition and have not been assessed prior to the date of confirmation of a plan. The section also provides for the collection from the debtor or the corporation resulting from the reorganization proceeding of all Federal or State taxes which may become owing from a receiver or trustee of a debtor or from a debtor in possession. This assumption clause is designed to give adequate protection to the interests of the United States Government not only in connection with taxes which become due during the pendency of the proceedings but also in cases where the current tax return had not been filed during such period or where the amount of tax liability for a prior period had not been adequately determined by the Treasury Department prior to confirmation of the plan.

Section 268 expresses the principle that no taxable income or profit shall accrue to or have been realized by a debtor or by a corporation organized under the plan by reason of a modification or liquidation of the indebtedness of the debtor in the plan. The committee believes that any possible abuse of the exemption from tax thereby granted is provided against in section 269, referred to above, and that any neces sary further safeguards of the interests of the Government can be adequately provided by regulations of the Treasury Department.

The committee believes these new tax provisions will strike a balance between the necessity of safeguarding the Government's tax interests in a debtor corporation, or the new corporation resulting from the reorganization proceedings, and the necessity of scaling down the indebtedness of the debtor corporation in order to make the plan

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successful. It is felt that any leniency of this kind on the part of the Government, when its interests are properly safeguarded, will contribute to the success of the plan of reorganization and to the general objective of preserving a business enterprise so that it may not only continue to be economically productive but also productive of future normal taxes.

The same underlying philosophy applies to chapters XI, XII, and XIII with, of course, necessary modifications. Section 396 and section 397 of chapter XI are substantially the same as section 268 and section 270 of chapter X. Section 394 of chapter XI enumerates specifically the documents which must be forwarded to the Secretary of the Treasury by the clerk of the court or the referee in order that the Treasury Department may be currently informed of all stages of the arrangement proceedings.

The tax provisions in chapter XII are substantially the same as in chapter X.

Sections 678, 679, and 680 of chapter XIII instruct the clerk or referee to forward necessary documents and notices to the Secretary of the Treasury; declare that, as in the previous three chapters, no taxable income or profit shall result from a modification or a liquidation of the indebtedness of the debtor; and give to the United States Government 1 year to collect certain taxes which have been determined or shall be determined within that period.

PART III

In compliance with paragraph 2a of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill are shown as follows: Existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italics, and existing law in which no change is proposed is shown in roman.

CHAPTER I--DEFINITIONS

SECTION 1. MEANING OF WORDS AND PHRASES.-a. The words and phrases used in this Act and in proceedings pursuant hereto shall, unless the same be inconsistent with the context, be construed as follows:

(1) "A person against whom a petition has been filed" shall include a person who has filed a voluntary petition;

(2) "Adjudication" shall mean [the date of the entry of a decree that [the defendant in a bankruptcy proceeding] a person is a bankrupt; [or if such decree is appealed from, then the date when such decree is finally confirmed;] (3) "Appellate courts" shall include the circuit courts of appeals of the United States, [the supreme courts of the Territories.] the United States Court of Appeals of the District of Columbia and the Supreme Court of the United States;

(4) “Bankrupt” shall include a person against whom an involuntary petition or an application to [set a composition aside or to】 revoke a discharge has been filed, or who has filed a voluntary petition, or who has been adjudged a bankrupt;

(5) “Bona fide purchaser” shall include a bona fide encumbrancer or pledgec and the transforce, immediate or mediate, of any of them;

[65] (6) "Clerk" shall mean the clerk of a court of bankruptcy; [22] (7) "Conceal" shall include secrete, falsify and mutilate; [(6)](8) "Corporation" shall [mean] include all bodies having any of the Powers and privileges of private corporations not possessed by individuals or partnerships and shall include [limited or other] partnership associatious organized under laws making the capital subscribed alone responsible for the debts of the association, joint-stock companies, unincorporated companies and associations, and any business conducted by a trustee or trustees wherein

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57 beneficial interest or ownership is evidenced by certificate or other written instrument;

[(7)] (9) "Court" shall mean the judge or the referce of the court of bankruptcy in which the proceedings are pending; [and may include the referee:] [(8)] (10) "Courts of bankruptcy" shall include the district courts of the United States and of the territories and possessions to which this Act is or may hereafter be applicable, the [Supreme] District Court of the United States for the District of Columbia and the United States Court of Alaska; [(9)] (11) "Creditor" shall include anyone who owns a debt, demand or claim provable in bankruptcy, and may include his duly authorized agent, attorney or proxy;

(12) "Date of adjudication" shall mean the date of entry of the decrce of adjudication, or, if such decrce is appealed from, then the date when such decree is finally confirmed or the appeal is dismissed;

[(10)] (13) "Date of bankruptcy," [or] "time of bankruptcy," [or] “commencement of proceedings," or "bankruptcy," with reference to time, shall mean the date when the petition was filed;

[(11)] (14) "Debt" shall include any debt, demand or claim provable in bankruptcy;

[(12)] (15) “Discharge” shall mean the release of a bankrupt from all of his debts which are provable in bankruptcy, except such as are excepted by this Act:

[(13)] (16) "Document" shall include any book, deed, record, paper or instrument in writing;

(17) “Farmer” shall mean an individual personally engaged in farming or tillage of the soil, and shall include an individual personally engaged in dairy farming or in the production of poultry, livestock, or poultry or livestock products in their unmanufactured state, if the principal part of his income is derived from any one or more of such operations;

(18) "Holiday” shall include New Year's Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Armistice Day, Christmas Day, and any day appointed as a holiday or as a day of public fasting or thanksgiving by the President or the Congress of the United States, or by the Governor or the Legislature of the state in which the proceeding under this Act is filed or pending;

[(14) "holiday" shall include Christmas, the Fourth of July, the Twentysecond of February, and any day appointed by the President of the United States or the Congress of the United States as a holiday or as a day of public fasting or thanksgiving:]

[(15)] (19) A person shall be deemed insolvent within the provisions of this Act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed, [or] removed, or permitted to be concealed or removed, with intent to defraud, hinder or delay his creditors, shall not at a fair valuation be sufficient in amount to pay his debts;

[(16)] (20) “Judge" shall mean a judge of a court of bankruptcy, not including the referee;

[(17)] (21) “Oath” shall include affirmation;

[(18)] (22) “Officer" shall include clerk, marshal, receiver, custodian, referee and trustee, and the imposing of a duty upon, or the forbidding of an act by, any officer shall include his successor and any person authorized by law to perform the duties of such officer;

[(19)] (23) "Persons" shall include corporations, except where otherwise specified, and officers, partnerships and women, and when used with reference to the commission of acts which are [herein] forbidden under this Art shall include persons who are participants in the forbidden acts, and the agents officers and members of the board of directors or trustees or of other similar controlling bodies of corporations;

[(20)] (24) "Petition" shall mean a document [paper] filed in a court of bankruptcy or with a clerk thereof [or deputy clerk] by a debtor praying for the benefits of this Act, or by creditors alleging the commission of an act of bankruptcy by a debtor therein named;

(25) "To record” shall include to register or to file for record or registration: [(21)] (26) “Referee" shall mean the referee who has jurisdiction of the case or to whom the case has been referred or anyone acting in his stead: (27) “Relatives” shall mean persons related by affinity or consanguinity within the third degree as determined by the common law, and shall include the spouse;

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[(23)] (28) "Secured creditor" shall include a creditor who has security for his debt upon the property of the bankrupt of a nature to be assignable under this Act or who owns such a debt for which some indorser, surety, or other person secondarily liable for the bankrupt has such security upon the bankrupt's assets;

[(24)] (29) "States" shall include the territories and possessions to which this Act is or may hereafter be applicable, Alaska and the District of Columbia; [(25)] (30) Transfer" shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of firing a lien upon property or upon an interest therein, [or the possession of property.] absolutely or conditionally, voluntarily or involuntarily, by or without judicial proceedings, as a conveyance, sale, assignment, payment, pledge, mortgage, lien, encumbrance, gift, [or] security or otherwise;

[(26)] (31) Trustee" shall include all of the trustees and "receiver" shall include all of the receivers of an estate;

[(27)] (32) "Wage-carner" shall mean an individual who works for wages, salary, or hire, at a rate of compensation not exceeding $1,500 [one thousand five hundred dollars] per year:

[(28)] (33) Words importing the masculine gender may be applied to and include all persons; [corporations, partnerships, and women ;]

[229] (35) Words importing the plural number may be applied to and mean only a single person or thing: and

[(0)] (35) Words importing the singular number may be applied to and mean several persons or things.

CHAPTER II-COURTS OF BANKRUPTCY

SEC. 2. CREATION OF COURTS OF BANKRUPTCY AND THEIR JURISDICTION.—a. [That] The courts of bankruptcy as hereinbefore defined Enamely, the district courts of the United States in the several states, the Supreme Court of the District of Columbia, the district courts of the several territories and possessions to which this Act is, or may hereafter be, applicable, and the United States court in the District of Alaska, are hereby made courts of bankruptcy, and are hereby invested, within their respective territorial limits as now estab lished, or as they may be hereafter changed, with such jurisdiction at law, [and] in equity and in admiralty as will enable them to exercise original jurisdiction in [bankruptcy] proceedings under this Act, in vacation, in chambers, and during their respective terms, as they are now or may be hereafter held. to

(1) Adjudge persons bankrupt who have had their principal place of business, resided or had their domicile within their respective territorial jurisdictions for the preceding six months, or [the greater portion thereof】 for a longer portion of the preceding six months than in any other jurisdiction, or who do not have their principal place of business, reside or have their domicile within the United States, but have property within their jurisdictions, or who have been adjudged bankrupts by courts of competent jurisdiction without the United States, and have property within their jurisdictions;

(2) Allow claims, disallow claims, reconsider allowed or disallowed claims and allow or disallow them against bankrupt estates;

(3) Appoint, upon the application of parties in interest, receivers, or the marshals to take charge of the property of bankrupts and to protect the interests of creditors after the filing of the petition and until it is dismissed or the trustce ix qualified; and to authorize such reeciver, upon his application, to prosecute or defend any pending suit or proceeding by or against a bankrupt or to commence and prosecute any suit or proceeding in behalf of the estate, before any judicial, legislatire, or administrative tribunal in any jurisdiction, until the petition is dismissed or the trustee is qualified: Provided, however, That the court shall be satisfied that such appointment or authorization is Necessary to preserve the estate or to prevent loss thereto;

[(3) appoint receivers or the marshals, upon application of parties in interest, in ease the courts shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after the filing of the petition and until it is dismissed or the trustee is qualified :]

(4) Arraign, try, and punish [bankrupts, officers, and other] persons [and the agents, officers, members of the boards of directors or trustees, or other similar controlling bodies, of corporations] for violations of this Act, in accord