Evening star., 1932-03-06
BANKRUPTCY LAWS
FAIL, SAYS THACHER
Solicitor General BIames Gain
in Failures on Laxity,
Waste and Fraud.
BY JOHN F. CHESTER,
Associated Press Stan Writer.


There will be fewer bankruptcy cases
in the United States If the energetic
solicitor general of the Justice Depart
ment has his way.
Thomas D. Thacher. after an inten-
sive 18 months probe, has convinced
himself that the sudden soaring Of
bankruptcy liabilities annually into the
billion dollar class is resulting not from
worldwide economic strain but from
far-f1ung laxity, waste and fraud under
bankruptcy law and practice.
In fact, the solicitor general believes
emphatically the present law has failed
After peering personally or through the
eyes of his assistants into 10 States,
examining thousands Of cases, and
reading the reports of the Chamber OF
Commerce of the United States, and
other national organizations which as
sisted, he has scattered these conclu-
sions through a 400-page report:
The Bankruptcy Court has increas
tngly become dumping ground Tor the
refuse of commercial wreckage, and q
sanctuary where debtors obtain cancel
lation Of their debts regardless OF how
ENCOURAGED to Repeat.
Debtors who by such conduct have
imposed heavy losses upon those who
trusted them are turned back by thou
sands into the trading community, en-
couraged to repeat their ofenses with
impunity.
"A discharge (of debts) is privilege,
which should be granted only to those
who, upon inquiry, are found deserving,
but the statute, in effect, treats the
discharge as a right, which should be
denied only upon the proof OF fraud by
the creditors"
The solicitor generals findings.
coupled with his draft OF highly
technical bill covering more than 100
pages to amend the existing bankruptcy
act, were made public in conjunction
with President Hoover's special message
to Congress this week on law enforce
ment.
The Chief Executive adopted almost
verbatim many Of Thacher's criticisms
and recommendations. Steps already
are underway in both the Senate and
the House to cut down the number Of
bankruptcies, plug the loopholeS and
stem waste and corruption under the
law.
Senator Hastings, Republican, Della
ware, has introduced a measure based
upon Thacher's suggestions. Chairman
Summers Of the House Judiciary Coms
mittee has promised hearings within
10 days looking toward "a complete
overhauling Of the bankruptcy laws"
Some Of Goals Stated.
Here are some Of the goals aimed at;
To stop up "an obvious loophole"
through which those who remove or
hide assets in advance of bankruptcy
have been escaping criminal punish
ment.
To provide protection Of the court
for honest debtors who could pay out
OF future earnings without being ad-
To increase the compensation of
trustees and appoint competent officials
to examine each bankruptcy plea.
Thacher'S prolonged investigation dis
closed that bankruptcy liabilities rose
swiftly during the decade from 1921
from $171 100000 to 81 ,0o8. .ooo, 900, and
that from the latter figure losses of
$9ll 100000 resulted to creditors. A
break up Of court records during 1880
disclosed that more than 73 per cent
Of the bankrupts Of that year had less
than 500 in assets.
The solicitor general discovered there
was an almost wholesale discharge Of
bankrupts" virtually without competent
inquiry as to whether they had hidden
their assets prior to filing bankruptcy
claims, or whether they had gambled
or wasted away their income.
When he turned to the administers
ton Of bankrupt estates, Thacher found
that in some instances the trustees ap-
pointed were real estate agents, gaso-
line station attendants and railroad
employees, and that the referees fire.
quently appointed clerks in their own
offices or relatives to act in this capa-
city.
To straighten out such evils, he urged
that additional compensation be given
the trustees, that legal formalities be
dispensed with whenever possible and
responsibility be placed squarely upon
trustees chosen only from "competent
business personnel"
All in all, from his 18-month inquiry.
Thacher decided that the unwarranted
dissipation of assets and loose adminis-
tration under the law had more than
fulfilled the gloomy prophecy" made by
many when the present act was drafted.
Were 1t not for the responsibility of
the Government upon which all laws
are predicated," he indicated, he might
not look with disfavor upon full repeal
OF the existing act