Evening star., 1933-01-12
DEBT RELIEF BILL
GETS WIDE SUPPORT
Senate and House Virtually
Unanimous on Pending
Legislation.
BY DAVID LAWRENCE.

Virtual unanimity Of opinion prevails
In the Senate and House with respect
to the pending bill for the relief OF
debtors whose passage has been ac-
oelerated by the special message of
President Hoover.
There are some details to be ironed
out, but the measures introduced in the
House by Representative La Guardia of
New York and McKeown of Oklahoma
will be consolidated, while the bill TO be
introduced in the Senate by Senator
Hastings of Delaware. follows substan-
TALLY the same lines as both House
bills so that for all practical purposes
the new legislation is not likely to en-
counter any legislative snag5 and may
become lawbefore the end of the present
month.
The original draft of the bill under
consideration by Joint committee OF
the Senate and House has been split
into thre sections. La Guardia's section
deals with railroads and the principal
change Is that the Interstate Commerce
Commission Is to participate in the
approval of reorganization plans relat-
ing to railroads. McKeown's sections
deal with general corporations and with
individuals.
Deals With Individualst
1t is not generally realizsd that the
new legislation deals with individuals
and their creditors as we'll as with cor
porations. Thus all individual who Is
unable to pay his debts at maturity
files such an affidavit with the Federal
Court and, after a meeting with his
creditors, he discusses a possible eX-
tension of payments, Should he obtain
the consent of the majority of all his
creditors in number and amount OF
dollar indebtedness. including general
and secured creditors, he appears
through counsel in court once more
and, II the court approves, then the
extension becomes effective.
1t may provide, If deemed desirable
by the parties at interest, that the
secured creditors may have q priority
over the unsecured or general creditors.
But the agreement when approved by
the court is made binding upon both Sc
cured and unsecured creditors though
only after the court decides that the
settlement or extension Is fair and
equitable
The agreement may provide that liens
shall not be affected in their basic re-
lationship to the property Of the debtor,
but that the payment date shall be
merely postponed. Thus the entire pro-
ceeding may revolve around postpone
ment alone or it may cover other points
at issue on which a majority OF cre'l-
itors have agreed.
The main value of the extension Is
that an individual facing foreclos $res
or attachments may avoid the stigma
Of bankruptcy by filing petition which
becomes the basis of an ultimate agree
ment with the ma jority of his creditors
and in effect prevents the minority
from holding him up or compelling
what is commonly known as buying
Of" claims.
Bankruptcy May BE Declared.
Failure on the part of an individual
to comply with the extension or reor-
ganiZation plan puts him in peril of
being adjudicated a bankrupt by order
of the court, for 1t there Is bad faith or
the interests of creditors have been dis
paraged by fraud in executing the
agreement originally approved. then the
Judge dealing with the case will be able
instantly to order an adjudication in
bankruptcy with the usual liquidation
Of assets.
The provisions relating to general
corporations have not been materially
amended since the original draft was
laid before the Joint Committee OF the
Senate and House.
The consent OF two-thirds of the
secured and two-thirds of the unse-
cured or general creditors Is necessary
before there can be court approval OF
the petition for reorganization. The
interests of the minority are to be pro-
tected either through the opportunity
given to protest TO the court or by pre-
serving the lien or by selling the lien
after fair appraisal by the court,
The legislation follows the lines Of
British and Canadian law with refer
ence TO debtor and creditor relations
and represents an advance which con-
forms TO existing conditions, but still is
within the general bankruptcy powers
Of the Constitution.
copyright, 1881