Bankruptcy law

“ If the bankrupt, at the time of bankruptcy by disenabling himself from performing the contract in question, and by repudiating its obligation, could give the proving creditor the right to maintain at once a suit in which damages could be assessed at law or in equity, then the creditor can prove in bankruptcy on the ground that bankruptcy is the equivalent of disenablement and repudiation. ”

“ The Constitution grants Congress exclusive power to regulate bankruptcy and under this power Congress can limit that jurisdiction which courts, State or Federal, can exercise over the person and property of a debtor who duly invokes the bankruptcy law. If Congress has vested in the bankruptcy courts exclusive jurisdiction over farmer-debtors and their property, and has by its Act withdrawn from all other courts all power under any circumstances to maintain and enforce foreclosure proceedings against them, its Act is the supreme law of the land which all courts-State and Federal-must observe. ”

“ Whenever there has been no national bankruptcy law in existence, the States have been held to be free to pass such insolvent laws as they might think proper. During the existence of a national bankruptcy law no State insolvent law can be of any force which covers the same field. ”

“ Conflict-of-law problems have a beguiling tendency to be made even more complicated than they are. Therefore, they are often, as now, fitting occasions for observing the classic admonition to begin at the beginning. The business of bankruptcy administration is to determine how existing debts should be satisfied out of the bankrupt's estate so as to deal fairly with the various creditors. The existence of a debt between the parties to an alleged creditor-debtor relation is independent of bankruptcy and precedes it. ”

“ We agree with the conclusion of the Circuit Court of Appeals that the claim for interest on interest should not be permitted to share in the debtor's assets, but disagree with the reasons given for that conclusion.
A purpose of bankruptcy is so to administer an estate as to bring about a ratable distribution of assets among the bankrupt's creditors. What claims of creditors are valid and subsisting obligations against the bankrupt at the time a petition in bankruptcy is filed, is a question which, in the absence of overruling federal law, is to be determined by reference to state law. ”

“ A debtor may thus be insolvent without becoming bankrupt, but he cannot be a bankrupt without being insolvent, for bankruptcy is a legal declaration of his insolvency and operates as a statutory system for the administration of his property, which is thereby taken out of his personal control.
In primitive communities bankruptcy systems were unknown. Early methods. Individual creditors were left to pursue their remedies by such means as the law or practice of the community might sanction, and these were generally of a very drastic character. ”

“ Obligations exist or do not exist by force of State law though federal bankruptcy legislation is in force, just as State law determined whether they came into being or did not come into being between 1878 and 1898 when there was no bankruptcy law. ”

“ It is whether the legislation modifies the secured creditor's rights, remedial or substantive, to such an extent as to deny the due process of law guaranteed by the Fifth Amendment. A court of bankruptcy may affect the interests of lienholders in many ways. To carry out the purposes of the Bankruptcy Act, it may direct that all liens upon property forming part of a bankrupt's estate be marshaled; or that the property be sold free of encumbrances and the rights of all lienholders be transferred to the proceeds of the sale. ”

“ The bankrupt act of 1898, § 2, invests the courts of bankruptcy 'with such jurisdiction, at law and in equity, as will enable them to exercise original jurisdiction in bankruptcy proceedings, in vacation in chambers, and during their respective terms;' to make adjudications of bankruptcy ”

“ That the decree in bankruptcy divested the subordinate court of all authority to proceed further in the case. 2. That the court had no jurisdiction, in any point of view, to render judgment against the assignee, even in the form exhibited in the record.
Much discussion of the first proposition is unnecessary, as it is directly opposed to several provisions of the Bankrupt Act, and particularly to that one which empowers the assignee to defend as well as prosecute all suits at law or in equity, pending at the time the debtor is adjudged bankrupt, in which such bankrupt is a party. ”

“ The word 'before' so used has reference to the provisions of the second section, whereby acts done 'in contemplation of bankruptcy, and for the purpose of giving any creditor, indorser, surety, or other person, any preference or priority over the general creditors of such bankrupt,' &c., 'shall be deemed utterly void, and a fraud upon this act.' Such acts so done before the act of bankruptcy, but being in contemplation of an act of bankruptcy afterwards committed, and contrary to the spirit of the bankrupt law, are declared void. ”

“ That the comprehensive provisions of §§ 68a and b of the bankrupt law relating to set-offs and counterclaims are coincident with the scope of the act, and therefore give the power to the bankruptcy court to determine whether or not the right of set-off exists as between all and any claims required to be surrendered as assets of the estate, on the one hand, and all debts proved against the estate, on the other, is, I submit, self-evident ”

“ Matter of People (Union Guarantee & Mortgage Co.) , supra, 285 N.Y. at page 343, 34 N.E.2d 345; Matter of Lawyers Title & Guaranty Co., 287 N.Y. 264, 272, 39 N.E.2d 233, we are unable to say that the rule laid down is other than one of state law governing the relative rights of claimants in a state liquidation. Nothing decided in Erir Railroad Co. v. Tompkins, supra, requires a court of bankruptcy to apply such a local rule governing the liquidation of insolvent estates. The bankruptcy act prescribes its own criteria for distribution to creditors. ”

“ Those who otherwise might make lawful and just arrangements to relieve themselves from difficulties produced by the present stringency in money are prevented by their constant exposure to attack and disappointment by proceedings against them in bankruptcy, and, besides, the law is made use of in many cases by obdurate creditors to frighten or force debtors into a compliance with their wishes and into acts of injustice to other creditors and to themselves. I recommend that so much of said act as provides for involuntary bankruptcy on account of the suspension of payment be repealed. ”

“ It must be borne in mind, however, that the subject is in some of its branches extremely intricate, and that both the law and the procedure are being constantly affected by a considerable body of judicial interpretation, while the acts also contain detailed provisions with regard to many questions incident to the administration of bankruptcy. A reference to the latest textbooks or competent professional advice will always be advisable for those who have the misfortune to be practically interested either as debtors or as creditors in bankruptcy proceedings. ”

“ BANKRUPTCY LAWS, regulations passed by a competent authority with a view to distributing the property of an insolvent equitably among his creditors and free the debtor from further obligation. In England, before 1841, only a tradesman could be a bankrupt. ”

“ The failure of this act may perhaps be ascribed to the diversity of the pre-existing provincial systems, embracing such contrasts as the English law of Ontario, and the French code based on cessio bonorum—which ruled in Quebec. Bankruptcy is dealt with in a fragmentary way by the provincial legislatures by acts regulating such matters as priority of execution creditors, fraudulent assignments and preferences, imprisonment of debtors, administration of estates of deceased insolvents. ”

“ Any other rule would leave the bankruptcy court powerless to deal in an effective way with those holding property for the bankrupt who, pending the bankruptcy proceedings, willfully dispose of it by placing it beyond the reach of the court. ”

“ The Bankrupt Act had a very different purpose. It was to secure equality of distribution of that which insolvents have when proceedings in bankruptcy are commenced, and of that which they have collusively with some of their creditors attempted to withdraw from ratable distribution, with intent to prefer some creditors over others. ”