NO WISDOM IN BANKRUPTCY

Southland Times, Issue 23624, 27 September 1938, Page 4

NO WISDOM IN BANKRUPTCY

BENEFITS OUTSIDE COURT “GOLDEN RULE IS A REALITY” “As the benefits to be derived by the debtor and his creditors are so much greater, generally speaking, when conducted outside the Bankruptcy Court, it is interesting to consider why so many estates were made bankrupt,” comments Mr G. W. Butterail, an Australian accountant in a review of bankruptcies in Australia in The Chartered Accountant. , “Usually it is found that bankruptcy proceedings are instituted either where a debtor’s affairs have become so hopelessly involved that no reasonable dividend may be expected, or where it is suspected that the debtor is not disclosing al| the assets of which he is possessed,” he proceeds. “In the first place, with the public accountancy profession at such a high peak and with book-keeping knowledge so widely available, it would appear that a great number of these estates should and could have been brought to the notice of the creditors before the creditors’ equity had been lost. Here the commercial community can assist by asking for periodical statements of account, balance-sheets, and income tax returns, and where this information is refused, suspicion of the accounts should be immediately aroused. Unfortunately, however, self-preservation being the first law of life, a creditor, having obtained the necessary information regarding the debtor’s affairs, ofttimes proceeds to compromise with the debtor in order to have his account liquidated, even to the extent of omitting to disclose his knowledge of the debtor’s affairs to other creditors.

i “Although such a creditor obtains a temporary advantage, he himself eventually suffers by some other creditor adopting the same principle. So the vicious circle ensues. A debtor cannot pay his account on its due date, the creditors then stop supplies, and the debtor begins to buy elsewhere. The creditor then sues for his money and is paid with the money received from the sale of goods which has been bought elsewhere.

“The golden rule of ‘do unto others as you would they should do unto you,’ is not some theoretical dream of the far distant future, but a practical reality Accessary in the commercial community of today, if the long list of sequestration orders is to be in any way curtailed.”