The New York herald., 1922-12-17
REFORMING BANKRUPTCY LAW

himself before the bankruptcy proceed
suggests TO one of the bankruptcy
specialists the condition of things and
furnishes three petitioning creditors.
These creditors are usually of small
amount and can readily be made to
order in a few days If none of the
ordinary trade creditors is to be used
The second lawyer files a petition In
involuntary bankruptcy on behalf OK
the three creditors who have been fur
nished. The first lawyer appears for
the bankrupt and consents to an adj
Indication that the concern Is bank
rupt. The petition and other neces-
sary papers are filed with the clerk OF
the United States District Court and a
receiver is at once appointed by the
United States district judge on the
motion of the second lawyer appear
ing for the three creditors. who are
nominally his clients. though actually
the bankrupt is his client.
The first knowledge the ordinary
business creditors have of the bank
ruptcy is the publication in the news
papers of the fling of the petition and
the appointment of the receiver.
The receiver at once takes possess
sion of the bankrupt's premises, and
If there are goods or other personal
property he puts a custodian in charge
OF them. Usually in such cases es
these the most readily salable goods
have been disposed OF. In some cases
the merchandise which has not been
sold has been hidden. All that is left
is odds and ends and fixtures.
On the theory that the lawyer who
files the petition is the representative
of the creditors II Is customary for the
receiver TO employ this lawyer as at
torneny for the receiver. II the law
yer in fact, represented the bulk Of
the creditors. that would obviously be
the proper thing to do. since the cred
itors have the first right to the assets,
and there should be no occasion for
employing one lawyer to represent
them and another lawyer to represent
the receiver, the receiver being in
theory the officer of the court ap-
pointed to protect the property In the
interest of the creditors.
The next step is to call a meeting
of the creditors and appoint cred
itors' committee. With a. failure or
any size 1t is customary to employ AN
accountant to go through the books
and prepare a statement for the re-
ceiver and the receivers committee
showing what assets there were and
what became OF them. In many bank
ruptcy cases. especially brokers and
bucketshops. the books have been kept
with view to their examination by
an accountant, and they do not dis
close the real parties who got away
with the assets.
The receiver is supposed TO conduct
or to wind up the business. whichever
is for the best interest of the creditors.
His duty is to reduce the assets to
cash and deposit the cash i'm a bank
which is an approved depository. The
customary way to sell the merchan-
disc is by auction, where IL rarely
brings more than a fraction OF the
price that could have been realized IL
handled through ordinary business
channels. However, 1t is difficult to
dispose OF o broken stock in the ordi-
nary course of business.
In some trades the credit associa-
tions try TO take over the StoclS and
handle II through trade channels. but
this hardly pays where the concern
has been thoroughly stripped OF every
thing that is quickly salable.
In the meantime. the debtor may
have been able to put through COM
position with the creditors That is,
he may be able TO get a majority OF
the creditors in number and amount
to vote TO accept smaller sum than
is due them and release him from fur
ther liability. These compromises are
usually little cash and the rest notes,