Evening star., 1933-01-31
DEBTLAW REFORM
EFFECT OUTLINED
individuals May Request Ex-
tension or Reduction OF
Obligations.

Provisions Of the bankruptcy reform
bill as they apply to individuals, cor
porations and railroad corporations In
the form of the bill passed by the
Sfouse were outlined today. as follows:
Individuals:
The first step is the filing of petit
hon with the district Federal court in
which the debtor states that he Is un-
able to pay maturing debts and wants
an extension Of time or a cut in the
Indebtedness.
After this, If the court accepts the
original petition, come an inventory OF
assets, hearings and action to protect
both debtor and creditor pending ac-
ceptance or rejection Of the plan the
debtor may propose.
Majority May Accept.
This may be accepted by a majority
Of the creditors and go into effect, or
If they disagree, the court may SILL
direct that the arrangement be put
into operation If he thinks it for the
best interests of all concerned.
As in the case of the present law,
farmer may not be forced into bank
ruptcy and the court may enjoin fore
closures or the sale Of other secured
assets by creditors.
Corporations:
Corporation reorganization may be
voluntary or involuntary.
If voluntary. the concern presents It's
claim much as the individual does.
Creditors holding not less than 10 per
cent of the amount of the entire In
debtedness may set the reorganization
In motion by petition to the courts.
The plan may propose recapitaliza-
ton, which would include the issue OF
new securities, or a scaling down OF
the Indebtedness, or both.
Following the present bankruptcy
law. the court may appoint trustees to
supervise the estate pending approval
or rejection Of the arrangement pro-
posed.
The plan must be accepted by credi-
tors and stockholders holding approx
mately two-thirds of the claims by
amount and two-thirds Of the stock.
There is, however, a clause which says
tf1at If adequate provision is made for
the protection OF any class of stock
holders the plan may 60 through with
out their acceptance.
Binding on Those Accepting.
Creditors and stockholders who do
not agree to the plan are not bound
unless the necessary two-thirds agree,
but sponsors of the measure say it may
remain binding on those who accept
and the result Is much the same as II
the two-thirds had agreed.
Drainage. irrigation, levee, sewer and
paving improvement districts are in
cluded in the scope Of the bill. Street
railroads and subways owned entirely
or in part by municipalities are ex-
cluded
Corporations are prevented from be-
ing receivers or trustees unless the
courts feel the appointment would be
to the best interest of the debtor. II
named in one case, a corporation may
not act in others.
Railroad corporations:
Railroad reorganization is similar to
other corporate reorganization with re-
gard to setting the reorganization In
motion and the terms Of its acceptance
by creditors and stockholders.
Before filing a reorganization petit
ton, a carrier must obtain the approval
OF the Interstate Commerce Commis-
sion
Like other corporation reorganiza-
tion. the reduction of the amount owed
or a recapitalization is authorized
Virtually all details Of railroad reor-
ganization are under the Interstate
Commerce Commission.
Referees May Be Named.
Some specific issues may be examined
by six special referees named by the
President and confirmed by the Senate.
Two would serve two years, two four
years and the other two six years.
The plan itself as presented to the
court, however, would be worked out
by the commission. The court has the
power Of approving 1t or rejecting, but
may not modify.
If rejected, the court states It's rea-
sons These go back to the commits
sion and may form the basis for an
other plan.
New issues of stock would be exempt
from the stamp tax laws.
The legislation may apply to bank
Suptcy proceedings now under way and
would embrace cases where railroads
ore In equity receivership.