Evening star., 1933-02-05
LEGISLATION TO AID
DEBTORS ANALYzED
New Measure Would Assist
Corporations and Individ-
uaIs in Difficulty.
BY DIR. MAX WINKLER.


NEW YORK, February NO one
will question the desirability Of reor-
ganizing the capital structure Of Ameri-
can corporations, notably carriers, with
the least possible expenditure and with
out loss of time. To facilitate such a
reorganization the House Of Represent
atlves, by vote of 20l to 43, has just
passed bill to amend the act entitled
An act to establish a uniform system
OF bankruptcy throughout the United
states, approved July /, 1898"
1t IS reported that the Senate Judici-
ary Committee favors the bill, but that
the Senate itself may add certain
amendments with regard to the pro-
visions permitting easy procedure for
insolvent individual debtors.
Features of Bill.
The principal features Of the bill
provide that railroads, corporations and
individuals who are either insolvent or
unable to take care Of contractual OBJ
legations, will be accorded immediate
hearing before courts to which their
problems may be submitted. The
courts, in turn, will facilitate the re-
organization of such debtors by en-
abling them to make good, without sale
OF assets, as IS ordinarily done in con-
ventional bankruptcy cases where sat-
lsfactory reorganizationS cannot be
brought about.
The manner in which the bill, II en-
acted, would be applied is about as fol-
lows: An individual who may be finan-
clally embarrassed will file with the
District Federal Court plan for getting
his Indebtedness reduced. or postponing
the maturity Of his obligations, to 60
i0fn affppt ha -
lor1ty OF creditors, or even without If
the court so decides. Corporations could
follow similar procedure
Railroads. before filing a petition for
reorganization, would be required to
submit such petition to the Interstate
Commerce Commission, and practically
all details of the plan would be under
the commissions regulations, with the
courts holding power to approve or
reject but not modify the program.
The bill is Of particular significance
of the country in abilishing receiver
ships, and charging the Interstate Com
merce Commission with reorganizing
insolvent carriers on the basis Of plans
submitted either by the railroads. them
selves, or by groups of creditors. In
all cases, either the creditor or the
debtor is privileged to submit plans Of
reorganization designed to salvage
whatever is left Of the business in ques-
ton as a going concern.
Relief Needed.
The constructive character Of the bill
Is apparent, especially if one considers
that 122 railroad companies last year
failed to earn fixed charges, and that
receiverships would be inevitable within
the next six months unless some relief
is afforded
somewhat similar situation obtains
In other fields. where immediate aid Is
absolutely necessary. Heretofore, in
ability to meet contractual obligations
resulted in receiverShip for the enter
prise In question. Generally this
process is cumbersome, expensive, and
time-consuming, entirely out of line
with conditions obtaining today. More
over such process was never suited to
the problems of railroad bankruptcy.
Commenting upon this phase of the
bill. Representative Rayburn of Texas,
chairman of the Committee on Inter-
state and Foreign Commerce, pointed
out that instead of relying upon some
master who would have to set up his
own staff and who would have little or
no experience in these matters the
court would rely upon the Interstate
Commerce Commission. which would
act very much as master would be re-
quired to act"
1t is obvious that expenses Of reor-
ganizations under the proposed bill will
be much less than in the case of con-
ventional receiverships, and the impor-
tance of this fact is evidenced by the
number of Representatives who voted
for the bill.
Position of Creditors.
One of the difficulties arising in con-
nection with the enactment of legisla-
tlon designed to change the method Of
reorganizing bankrupt properties re-
sides in whether it will be possible to
compel creditors, under the Constitu-
tion, to accept what may seem an eoui-
table adjustment, in place of what Is
stipulated in their bond.
II way can be found under the
Constitution to substitute for the pres
ent extravagant and time-consuming
process of receiverships a system which
will conform to the real equities Of the
case, a great deal will have been ac-
complished toward adjusting a serious
economic problem facing the United
States.
Copyright, 1893. by North American News
paper Alliance, Inc.)