Evening star., 1932-12-26
HUGE RELIEF STEP
IN DEBTORS PLAN
Law Substituting Court
Jurisdiction for Bankruptcy
Has Good Prospect.
BY DAVID LAWRENCE.

The biggest single stop In aid Of eco
nomic recovery that can be taken by
legislation is about to be considered by
Congress.
1t affects billions of dollars Of invest
ments and is the answer which Govern
ment officials feel can justly be given to
the debtor class which includes corpo-
rations, partnerships and individuals
who feel that they need the sanction of
law to work out their debt problems
Under existing law, business man
or an individual who finds himself un-
able to pay his creditors must undergo
the stigma of bankruptcy in order to
get relief Or, il he does think he can
eventually work out his situation, he
must run the risk of being thrown into
bankruptcy by any three creditors who,
however small their claims may be,
have the legal right to force liquida-
ton.
Bankruptcy means the distribution of
assets on a pro rata basis. 1t does not
provide for the continuance of the buSi-
ness unless the bankrupt concern can
raise sufficient money to buy out at
foreclosure proceedings the assets OF the
business in which it had previously
been engaged.
It is known there are literally mil
lions of persons who are staving on
bankruptcy because they know hquida-
ticn will not bring real relief. For years.
also, even in normal times bankruptcy
has been a method whereby many have
sought to evade their obligations.
Jurisdiction for Courts.
It has, therefore, been proposed that
the present laws be amended so that
the courts may take jurisdiction over
those cases where individuals or busi-
nesses may be able to win the approval
of two-thlrds of their creditors to
plan of reorganization. It affects bor-
rowers on home or farm mortgages, as
we'll as corporations, and would include
railroads.
Reorganization proceedings rather
the relief about to be offered to the
debtor class. The author of the plan
is Solicitor General Thomas Thacker,
who made an exhaustive study of the
whole bankruptcy situation for nearly
two years and came to the conclusions
which are now expressed in bills pend
ing before Congress, among them one
introduced by Senator Hastings OF
Delaware which is before Joint Com
mittee of both Houses.
The measure proposes, OF course, to
protect the creditors as well as the
debtors. There are some members Of
Congress who would 60 further and
wipe out mortgages and other forms of
debts. but it IS unlikely that this will
prevail, because it would mean inter-
ference with future financing and
would at the same time impair financial
structures which own large quantities of
mortgages or bonds.
The plan provides, first of ALL that
an individual or a company may ap-
pear in court with a petition stating
that relief is desired because of an inv
ability to pay maturities. This may be
the case not only with individuals
nowadays, but with many corporations,
including some railroads. The usual
course is to appoint a receiver, and this
means tremendous expense, especially
with companies that have been COM
PEELED to apply for receivers in all parts
of the United States where they may
have properties.
Interference Is Stopped.
When the petition. therefore. is filed.
merely asking for relief, the court takes
Jurisdiction and from that moment on
there can be no interference by cred
| itors, enforcing bankruptcy proceed
| ing It becomes necessary then for the
individual or company to obtain by
negotiation approval Of two-thirds of
the creditors In each class both Sc
cured and unsecured If such approval
is obtained, the minority is given an
opportunity to protest, and its rights
can be taken care of by continuing
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