BANKRUPTCY REFORM

West Coast Times, Issue 916, 29 August 1868, Page 4

BANKRUPTCY REFORM

(FEO3I THE PAIIi MAIL GAZETTE.)

Down to the present time the course of bankruptcy legislation has been a reaction against the indiscriminate -rigors of tho old law. Justice as well as humanity was revolted at the idea of a man being flung into gaol for life, merely because by some ordinary mischance of fortune and by no fault of his own ho could not pay a bill when it fell due. Pity for the bankrupt excited prejudice against the creditor. The theory of the modern law seems to have been that the ono was a helpless victim, and the other a cruel and vindictive savage. This tendency has been carried to such an extreme that Mr Moffatt did not put the case at all too strongly when he said that we began by protecting the creditor and then went on to protect the debtor, till the present law may be described as giving immunity to fraud, and confiscating the assets of creditors.

The leniency towards debtors reached it's climax in the Act of 1862, and has been att- nded with the most disastrous, effects on commercial moralit} 7 -. The two broad features of the bankruptcy statistics are, on the one side, the continual in-crease-in the number of bankrupts, and on the other, the decrease in the value of the property available for distribution among their creditors. Between 18G1 and 1564, the cases of bankruptcy multiplied fivefold, while the assets were diminished by about a half, , Last year no fewer than 6532 persons were declared- bankrupt on their own petition — an increase in this class over the year before of 25 per cent., and as many as 5876 bankrupts escaped without paying a farthing of dividend. Such facts as these speak for themselves. But even where creditors get nothing, there is a certain social gain in having a man openly marked as a bankrupt. L'eople arc put on their guard ; the frequency of the occurrence, and the rate of dividends are warnings of the risks to be encountered in any dealings in that quarter. Private arrangements are, as it were, the quicksands and sunken reefs of the mercantile ocean. It is true they are supposed to be indicated on the chart, but they are apt to escape notice, and there is wanting that emphatic publication of danger which is afforded in the case of actual bankruptcies. To withdraw all legal sanction from composition deeds would be unfair both to debtor and creditors ; but it is clear that they require very careful watching, and ought to be surrounded with more effectual precautions against trickery than now exist. The fact that at present a debtor has it in his power to coerce the helpless people to whom lie owes money into accepting almost any terms he. chooses to propose by the mero threat of declaring himself bankrupt, and thus practically withdrawing from their reach even such poor assets as he offers for a division amongst them, is only an additional reason for placing a check ou the growth of private arrangements. Public policy is not limited to securing the largest returns to creditors ; something is due in the shape of warning to the rest ofth£ community, and this is Jost when the " smash" is hushed up by means of a private settlement. The object to be aimed at is to bring the career of a bankrupt to a close whilo he has still means to pay his creditors nearly all he owes. But under the system of composition deeds a rotton firm might go on for years victimising one set of .creditors after another, and pursuing what would be morally, however it might appear in the eye of the law, a course of systematic embezzlement.

It is hardy too much io say that a vast system of swindling to the tune of several millions annually is thus carried on in the most shameless manner under the sanction of the law. Mr Moffatt's bill i.? intended to put a stop in some degree to tin's intolerable state of things. It provides— several of the clauses being taken from Lord Cairn's larger measure — that no deed of arrangement shall be valid unless a full and c'etaileil list of the debtor's liabilities aud assets is at the same time deposited with the Chief Registrar in bankruptcy; this list is to be notified in the " Gazette," and inspection of it allowed 1o all creditors. Each creditor assenting to a composition deed is required to prove his claim by affidavit or declaration, to bo duly filed in the registry : and it will be open to any creditor over £10 to demand an examination in open court of the debtor or any of his fellow creditors. Another object of this measure is to make a debtor's capacity to declare himself bankrupt contingent upon his paying five shillings in the pound, or having the consent of three-fourths of his creditors with claims above £10.