The Saint Paul globe. (St. Paul, Minn.) 1896-1905, 1898-07-20
NEW BANKRUPTCY SYSTEM
SOME OF ITS POINTS EXPLAINED
BY SENATOR NELSON
TOrrey Bill-The InsOlvent May
Now Get n Discharge and Begin
Business Over Again-A New
DEFINITION of InsOlvency-The
Law u Compromise Measure,
Jaw a Compromise Measure.


Law Compromise Measure.
When the senate took final action
upon the bill providing for a uniform
system of bankruptcy, Senator Knute
Nelson was called upon to explain some
CT its provisions. The senator had
taken leading part in the preparation
OF the bankruptcy bill which passed
the upper house. The TCrrey bill had
finally passed the house. They differed
SO materially that conference commit
tees We're called for. The bill which
was finally agreed upon by the TWO
committees is a compromise measure.
1t passed into law and becomes known
as the Nelson bankruptcy law. MI.
Nelson's Interpretation of its features
Is contained in the following report OF
his remarks in the senate, on the oath
Of June:
At the last session of congress the senate
passed bankruptcy bill. 1t was in it's chief
| provisions voluntary bill. 1t contained proyi-
SONS Tor involuntary bankruptcy in two
classes OF cases-cases where a man made a
transfer of his property with intent to defraud
his creditors and cases where a man trans
derre i MS property with intent to prefer some
stated in general terms, but were ample to
cover those two classes of cases.
When the bill went over to the house, they
adopted as substitute for it substantially,
with some notifications, what has been known
Tor years as the Torrey bill The bin came
back IN that condition and went into confer
ence on the ID OF March last and we have
been wrestling with it in conference from that
time until about week ago.
may say. inasmuch as 1 was to some ex-
tent the author of the senate BILL that l al
ways felt that in the matter of procedure it
was not as complete bill as it ought to be.
ltd left good deal to be SUP
! hnty-
bill, on the other hand, contained eIab-
crate provisions as to administration and
procedure. good deal of 1t perhaps might
nave been we'll left to rules of court. The
conierees however, concluded that it was
perhaps best to adopt what are known as the
aominlstTatlve and procedure features of the
The main contention between the two houses
and between the conferees of the respective
As to the grounds of involuntary bank
ruptcy; next, as to the offenses for which
bankrupt could be imprisoned; and, thirdly,
placed upon discharge
The house bill contained nine different c.ass-
es Su,, Of grounds for bankruptcy. put under
eight distinct heads, one Of them, the fourth
containing two grounds. Four of those
grounds have been entirely eliminated by the
ccn:eren nee. al d the other i've ave teen great
ly modified The five grounds for Involuntary
bankruptcy agreed upon by the conferees
these:
First-A transfer or concealment of property
with intent to defraud ones creditors:
Second-A transfer of property while in
solvent solvent with intent to prefer one or more
Third-A preference through legal proceed
ings. coupled with the fact that the alleged
bankrupt must be insolvent and that he has
failed to remove the embargo preference
that has occurred through legal proceedings
hve days before-a sale of his properly in
the proceedings:
Fourth-Where a man has made a general
assignment to his creditors; and.
Fifth-Where a man has admitted in writ
ing his Insolvency and his willingness to be
put into bankruptcy on that ground.
1t will be perceived that in respect of the
last two grounds they are practically volun-
tary. If man makes no general assign
ment to his creditors. he can not be put into
bankruptcy; and If man is in an insolvent
condition. he has one of two options He
can either. go into voluntary bankruptcy or
he can make a general assignment for the
benefit Of his creditors; in either case his
estate is administered in bankruptcy and he
gets his discharge.
The fifth ground. of course. is purely within
his control: 1t Is admitting his insolvency
and his willingness to go into bankruptcy
to this: The man says, 81 do not care about
being put to the trouble Of going into bank
rup5ey admit nit, am Inns insolvent If my
Bankruptcy
Practically. then. there are only tn ee
grounds of involuntary bankruptcy. and two
creditors and transfer to preferred creditors
ARE substantially included in the senate
Dill, lHOuSu III uUIo SeuGTdl lerHS' utS6
two grounds are, moreover, wholly at the
option and under the control of the bankrupt
The only. other ground is what is termed
preference by legal proceedings. that is if
man is insolvent and his creditors proceed
against him by attachment, and through such
process seek to take his property. in that
case If he Is not able to discharge those
proceedings before final sale on execution,
he can be put into bankruptcy.
It Is to be We in respect to th
provisions of the bill, that the attaching
creditor can easily be deprived of his prefer
ence If bankruptcy proceedings institute
set aside and the property that he has at
tached goes into the general estate of the
bankrupt for distribution among the credit
ors. Hence, while there may seem to he an
apparent hardship in the eyes of those who
are opposed to Involuntary bankruptcy in
this case. yet there is, on the other hand
a protection in it against the attaching credit
or, for he will be slow to move when he
knows that the other creditors can put the
ment, and he will have nothing left but the
expense of~paying costs and attorneys fees.
Mr.. FaulknerIIs there any provision y, which nc
usual and ordinary course OF Judicial pro-
cedure on judgment against a party?
ooMp p With these grounds for involuntary
bankruptcy which ] have described IS an
other thing that gives color to the Whole
of those grounds Under the house bill if a
man had committed one of the nine classes
of acts of bankruptcy, he could be put into
bankruptcy on the petition OF his creditors,
even though he was solvent. In the confer
ence bill we have made it a condition that
no man. no matter what act of bankruptcy
he has committed, can be put into bankruptcy
unless he is insovent
Then we have adopted new rule. a new
definition of insolvency. Under the Old bank
ruptcy law and at common law man WAS
deemed nsolvent when he did not pay his
debts in the ordinary course OF business when
they were due. l will read this brief eta
frnn p1Ir,on IN
familiar to Nest lawyers:
Insolvency, within the meaning of the bank
rupt act, means inability to pay debts in
the ordinary course OF business, as persons
carrying on trade usually do
That was the definition and rule which
were applied under the cid bankruptcy law.
That is the definition and rule which is SUBJ
insolvency law. In the conference till We
have adopted new rule Or definition for
insolvency. We say in this conference bill
that man is not insolvent if all his property,
cealed to defraud his creditors, at fair val
uation. is equal to ray his debts. He may
be in default his notes and his commercial
paper. or his other dues, still if he can
at a fair valuation. exclusive of what he has
attempted to dispose of to defraud his credit
ors is equal in value to his debts, then he
is not insolvent and can not be put into bank
ruptcy.
But on account of adopting this new rue
of insolvency have in connection with it.
from the necessity of the case adopted
different order of proof. We require the al
ing his solyency. Under the OF rue and
definition of insolvency it was very easy for
the creditor to show that the bankrupt had
not paid his paDer when it was due. 1t
to charge him with the duty of proving iuch
insolvency. But under this rev rule o. IN