The New York herald., 1922-03-05
Frequently Resorted To in
DemOralized Business
for Profit.
HOW FRAUDS ARE USED
Enforcement of Criminal Pro-
visions Of Law Needed More
Than New Laws.
NJ WILLIAM McMURrR1E spEEE

ny WILLIAM McMURTRIE SPEER
The total of bankruptcies docketec
in the clerks office of the United
States Court in the old Post Office
Building now exceeds 100000 That
does not include Brooklyn or Long
Island. but only what is known as the
Southern district Of the United States
Court, which includes old New York
and the Hudson River counties. Brook
lyn and Long Island are in the East
ern district. So great has become the
volume of bankruptcy business that
tho judges hold regular terms for
bankruptcies only and a specializing
bankruptcy bar conducts the legal end
Bankruptcy is process by which a
man cnn wipe out his debts and start
over again with no legal liabilities.
He is supposed to turn over all of his
property to receiver appointed by
the United States District Court. II
the majority of Eis creditors in num-
ber and amount consent to a COM
promise and the court approves the
compromise his old debts are can
celed. II the compromise is not ap-
proved his property is sold and the
proceeds less the bankruptcy ex.
penses are divided among his creditors
and he is then discharged from fur
thcr liability.
There are many henest bankruptcies
where business conditions or falling IN
prices or legitimate misfortune have
caused failure. But there are also
many cases and the number of such
cases has been increasing greatly since
the Generalization of business by the
war where bankruptcy is regarded as
a means 6 profit.
FraudufSut Bankruptcies.
IL Is these cases which have caused
associations Of manufacturers and mer-
chants to employ detectives to get
criminal evidence, which is the only
way these fraudulent bankruptcies can
be stopped. From the creditors point
OF view the difference between an
honest bankruptcy and a fraudulent
bankruptcy is that in an honest bank
ruptcy debtor turns over all of his
assets. while in a fraudulent bank
ruptcy large parts of the assets are
diverted or concealed
Proceedings in fraudulent bank
ruptcies often show months of care
full preparation. Large quantities OF
readily salable goods are bought on
credit and then either sold for cash or
transferred without a record of the
transfer being made on the books.
Then when the receiver takes charge
of the premises and property all that
he finds is a depleted stock with no
money in the bank and past accounts
collected or assigned and no trace on
the books of what became OF the as
sets.
The present bankruptcy law was
passed by Congress in 1898 and has
been amended from time to time TO
try to prevent fraudulent bankruptcies
and to insure the honest sale and dis
tribution among the creditors Of all
of the bankrupt's assets. The District
Courts of the United States have ex-
elusive Jurisdiction in bankruptcy.
The Legal Process.
A bankruptcy proceeding is begun
by filing petition in the United States
Court The petition may be filed by
creditors or the bankrupt himself may
file IT, Any corporation or individual
may become a bankrupt, though cor
poration may not become a voluntary
bankrupt. Big corporations readily
evade this provision by having friendly
creditors bring in bankruptcy proceed
ings.
y No one can be declared a bankrupt
il he is solvent. Solvency means that
his assets exceed his liabilities; In
other words. that his property would
sell for more than he owes,
What are known as "acts of bank
ruptcy" consist of concealing or trans
ferring the property to hinder or de-
fraud creditors or while insolvent TO
transfer property to one creditor or
to give that creditor advantage over
other creditors or to permit one cred
ftor to obtain a preference through
legal proceedings or to make an as
signment for the benefit OF creditors
or to admit In writing his inability
to pay his debts and his willingness to
be adjudged a bankrupt.
A bankruptcy petition may be filed
against any person who is insolvcnt
and who has committed act of
bankruptcy within four months. This
enables creditors to set aside a judg-
mcnt in the State courts or a prefer
enco to other creditors and to share
pro rata in the assets instead OF let
ting the other creditors be paid in
full.
1t frequently happens that a man
about to fail will transfer his house
to his wife and will pay his friends
and relatives in full. leaving nothing
for his other CREDITORS. There have
been cases where notes without con-
sideration would be given to relatives
and friends to make them creditors
and thereby provide a fund to COM
promise at lower figure with the
legitimate creditors who would find
Little if any assets to sell.
The Receiver steps In.
The first step when an application
for bankruptcy is filed is the appoint
ment of a receiver. The receiver is
appointed by the Judge of the United
States District Court who at that
time is holding the bankruptcy term.
The receiver must furnish bond Of
an amount fixed by the court. On
Ming the bond tho receiver takes pos