BANKRUPTCY, THE FEDERAL LAW OF.The constitution of the United States provides that "Congress shall have the power .... to establish uniform laws on the subject of bankruptcies." The need for a general law governing insolvency, thus appreciated at the time the constitution was drafted, has become even more apparent as the industrial and commercial life of our nation has developed and the economic interests of our citizen become increasingly interstate in character. Experience has shown that uniformity in state bankruptcy laws cannot be obtained. Each state has shown a natural tendency to prefer its own citizens, many of them have inadequately guarded against fraud, and, most of all, perhaps, a discharge under one state bankruptcy law does not operate to release the debtor from debts due foreign creditors.

The present law, enacted July 1, 1898, is the fourth which Congress has created under the authority granted it. The first law which was passed in 1800, copying the English law of the time, did not provide for voluntary bankruptcy, and was limited in its application to merchants and traders. It was repealed in December, 1803. The second law, passed in 1841, said to have been largely the work of Daniel Webster, introduced the idea of voluntary bankruptcy, but remained in force but eighteen months. The next law, that of 1867, provided for both voluntary and involuntary bankruptcy, but placed great restrictions upon the granting of discharges. The law proved very defective, permitting excessive fees and long delays, and was repealed in September, 1878. The present statute may be said to have three main aims: (1) The surrender of the debtor's entire estate to trustees; (2) The distribution of this estate among the creditors upon a pro rata basis, without preference, only that part of the assets being reserved to the bankrupt which the exemption law of his state secures him; (3) The complete discharge of the bankrupt from all legal liability upon his debts.

Both voluntary and involuntary bankruptcy are provided for. That is to say, a person finding himself hopelessly insolvent, may, upon his own initiative, take steps to have himself declared a bankrupt, and, also, upon his having committed certain acts, his creditors may proceed to have him declared a bankrupt. Thus Section 3 provides:

"Acts of bankruptcy by a person shall consist of his having (1) conveyed, trans

ferred, concealed, or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay or defraud his creditors, or any of them; or (2) transferred, while insolvent, any portion of his property to one or more of his creditors with intent to prefer such creditors over his other creditors; or (3) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, and not having at least five days before a sale or final disposition of any property affected by such preference vacated or discharged such preference; or (4) made a general assignment for the benefit of his creditors; or (5) admitted in writing his inability to pay his debts and his willingness to be adjudged a bankrupt on that ground. "A petition may be filed against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act."

Section 4 provides that "Any person who owes debts, except a corporation, shall be entitled to the benefits of this act as a voluntary bankrupt.

"Any natural person, except a wage earner or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any corporation engaged principally in manufacturing, trading, printing, publishing, or mercantile pursuits, owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this act. Private bankers, but not national banks or banks incorporated under State or Territorial laws, may be adjudged involuntary bankrupts."

The law goes to the extreme in the mercy which it shows to the debtor, granting him an absolute legal discharge from all indebtedness without respect to the percentage which the creditors are enabled to receive upon their claims. Only when the debtor has been guilty of some sort of deceit, as for example, fraudulently failing to keep, or in contemplation of bankruptcy, destroving or concealing his books of account, is he refused a discharge. At the same time effort is made to protect the creditor, by way of rendering as nearly impossible as may be the granting by the debtor of preferences to certain of his creditors. Not only are all express preferences declared void, but it is even provided that any advances made to a creditor by a debtor, being insolvent,

within four months before the filing of the petition of bankruptcy, shall be deemed a preference, and must be surrendered by the one so receiving it, if he would participate in the pro rata distribution of the insolvent's estate. Section 60 of the act reads as follows:

(a) A person shall be deemed to have given a preference if, being insolvent, he has procured or suffered a judgment to be entered against himself in favor of any person, or made a transfer of any of his property, and the effect of the enforcement of such judgment or transfer will be to enable any one of his creditors to obtain a greater percentage of his debt than any others of such creditors of the same class.

"(b) If a bankrupt shall have given a preference within four months before the filing of the petition, or after the filing of the petition and before the adjudication, and the person receiving it, or to be benefited thereby, or his agent acting therein, shall have had reasonable cause to believe that it was intended thereby to give a preference, it shall be voidable by the trustee, and he may recover the property or its value from such person."

The next clause provides, however, that: "(c) If a creditor has been preferred, and afterwards in good faith gives the debtor further credit without security of any kind for property which becomes a part of the debtor's estate, the amount of such new credit remaining unpaid at the time of the adjudication in bankruptcy may be set off against the amount which would otherwise be recoverable against him."

Section 57, g. provides: "The claims of creditors who have received preferences shall not be allowed unless such creditors shall surrender their preferences."

These are the clauses which have created the greatest amount of controversy in the courts and in business circles generally. Upon the one side it has been argued in support of their justice and wisdom that whereas, in former times, in cases of insolvency, it was almost always found that favored creditors-often relatives or business associates-obtained the bulk of the bankrupt's estate, now the entire body of assets is treated as a trust fund to be divided among those who have, in effect, created it, according to the amounts of their respective contributions to it. In other words, "equity" is interpreted to mean "equality."

On the other hand, it is argued, in the

first place, generally, that the diligent creditor is justly entitled to special consideration, and, in the second place, that the definition of what constitutes a preference is made so broad as practically to exclude claims which might justly be given a precedence. This feeling has been still further strengthened by the decision of the Supreme Court of the United States that a mere payment upon account in the ordinary course of business, made by a person being insolvent, within four months of the filing of the petition in bankruptcy proceedings, constitutes a preference, if its ultimate effect is to give the one to whom it is paid a percentage of his claim greater than that received by the other creditors, and this even should the one so favored not have known, or not have had reasonable grounds for knowing of, the insolvency of his debtor at the time the payment was made. Upon the whole, the better opinion seems to be that the preference sections, as they stand, and as they have been interpreted by the courts, are just and salutary.

As regards procedure, the law strives to compel the utmost dispatch in the making of distributions, and to keep the necessary fees as small as possible. In fact, as regards this latter feature, there are many who think the emoluments that are permitted are so small as to interfere with the proper administration of the law. Only one bill of costs is allowed to the bankrupt's lawyers, and that must be reasonable.

The act provides that the district courts of the United States and of the Territories, the supreme court of the District of Columbia, and the United States courts of the Indian Territory and of Alaska, shall exercise original jurisdiction in bankruptcy proceedings within their respective territorial limits. From these courts there is, in certain cases, the right of appeal to the federal circuit courts of appeal and to the United States Supreme Court. Provision is also made for the appointment of "referees," paid by fees, for the further facilitation of bankruptcy proceedings, and also for the selection of trustees by the creditors for the administration of estates. Pursuant to the direction of the court, any controversy arising in the settlement of an estate may be submitted to arbitration. Thus in every way the effort has been to secure a prompt, effective and cheap administration of the law.

The law has now been in operation for something more than three years, and op

portunity has thus been afforded for determining the extent to which it has satisfied the needs which called it into existence. During this time the number of petitions for voluntary bankruptcy has averaged about twenty thousand a year for the entire country. The number of petitions for involuntary bankruptcy has averaged about one thousand. This great difference in number of the two classes of petitions is partly explained by the fact that very many of the voluntary proceedings have been brought by old insolvents against whom judgments have been kept alive by creditors with the faint hope that ultimately, by some happy chance, they might be paid. But to a very considerable degree it is evident that the excess of voluntary over involuntary bankruptcies has been due to the fact that the act itself renders involuntary proceedings difficult, while at the same time showing extreme mercy to voluntary petitioners. Thus a committee of the American Bar Association has recently declared the law to be, as it stands, "a debtor's law rather than a debtor's and creditor's law-to be a law for the benefit of one class in the community rather than for the benefit of all classes." To correct the defect amendments are suggested which will in the first place add to the number of circumstances under which involuntary proceedings may be instituted, and which will, at the same time, declare that the conveying of property by the bankrupt for the purpose of giving a preference, with intent to hinder, delay or defraud his creditors shall not simply be void, as is now provided, but shall operate to prevent his discharge, and even be made a criminal offense. Another proposed amendment, which has also been approved by the American Bar Association is that where a debtor is found to be wasting his assets by gambling of any kind, or where he is in any way recklessly managing the property which is needed to pay his debts, he may be declared a bankrupt. Still another suggested amendment is that made by Mr. E. C. Brandenburg (Mr. Brandenburg has charge of bankruptcy matters in the office of the United States Attorney-General), Attorney-General), that where a man applies the second time for relief under the law, he shall not be discharged

unless his assets shall bear a certain ratio to his liabilities, say fifty per cent. on the second application, and seventy-five on the third, and so on. Finally, it has been urged by some that corporations should

not be excluded from the voluntary features of the law.

None of the above suggested amendments to the law of 1898 provide for any radical modification of its principles. The general opinion of lawyers and of disinterested business men seems to be that, upon the whole, the act is, considering the complex character of the subject with which it has to deal; an excellent piece of work, and that its continuance as a permanent feature of our commercial jurisprudence should be accepted as an almost certain fact. Thus the American Bar Association, which represents the best legal opinion of this country has put itself upon record as declaring: "That a bankrupt law is wise and beneficent legislation; that the general features of the present bankrupt law should have the approval and support of the bar and commercial community.”

REFERENCES: Statutes at Large, 55th Congress, Vol.. 30, pp. 544-566; Rpts. of the Attorney-General of the U. S.; Rpts. of the Am. Bar Assn.; E. C. Brandenburg, "The Law of Bankruptcy."

W. W. WILLOUGHEY, Associate Prof. Political Science, Johns Hopkins University.

BOLIVIA.-On Nov. 26, 1901, the arbitration protocol with Peru was signed. By its terms pending questions between the republics of Bolivia and Peru are submitted to arbitration.

A

During the year 1901 a treaty of extradition and a parcels-post agreement with the United States were entered into. treaty of friendship and extradition with Italy was ratified Jan. 7, 1901.

It was lately reported that the government of Chile intends to reopen negotiations with Peru and Bolivia to settle the Tacna-Arica question and to arrange a treaty with Bolivia on a broader and firmer basis than the present. Neither country has a diplomatic representative in Chile.

Returns are at hand of Bolivia's commerce during the year ended June 30, 1901. The value of the imports amounted to 13,500,000 bolivianos; of exports, 35,000,000 bolivianos, or a total of about 49,000,000 bolivianos. The countries from which im

ports were received were: Germany, 3.300,ooo bolivianos; England, 2,300,000; Peru, 2,000,000; Argentina, 1,000,000; United States, 900,000, and France, 800,000.

1 The boliviano fluctuates in value. On Jan. 1, 1902, it was worth about 42 cents in U. S. money.

The principal articles imported were: Cotton goods, valued at 1,700,000 bolivianos; foodstuffs, 1,500,000; woolen goods, 1,300,000; hardware, etc., 800,000; wines and liquors, 600,000; ready-made clothing, 500,000. The imports from Argentina are mainly cattle.

The chief exports were: Silver, 13,000,000 bolivianos; rubber, 10,000,000; tin, 8,000,000; copper, 1,000,000. The export tax on metals and minerals yielded 774,000 bolivianos in 1900.

Bolivia abounds in minerals, being especially rich in copper and silver. The mining industry was flourishing in 1901, and 1,172 concessions were granted during the fiscal year 1900-1901. Up to 1900 the number of permits was 119, covering the mining of coal, petroleum, peat, borax, calcite, sulphur, different salts, emeralds, etc. Valuable deposits of borax have recently been discovered. The development of the tin industry has been remarkable. The tin exports to London in 1900 amounted to 4,350 tons, more than the output of the celebrated Cornwall mines, their total product that year having been 3.910 tons. With better machinery Bolivia may equal the tin production of the Dutch East Indies and Australia.

The silver production of Bolivia in 1900 was valued at $6,406,712. Returns for 1901 are not at hand.

Rich deposits of gold have been known. to exist in Bolivia, but so far obstacles (such as climate, scarcity of laborers and lack of transportation) have prevented the working of gold mines except in a few instances. "The opinion is held that, with sufficient capital and proper methods of exploitation, Bolivia could easily become the first gold-producing country of the world."

In his last message President Pando spoke of the peaceful and prosperous condition of Bolivia, of its cordial relations with foreign nations, and of the prospects for the satisfactory settlement of boundary questions pending between the republic and neighboring countries-Brazil and Para

cussion of the boundary question, in the solution of which accurate geographical data respecting the regions to the northwest will be a potent factor."

Surveys have been made for new railroads, and public highways are under construction. Better transportation facilities assure the success of mining and industrial enterprises.

In various ways the government is trying to promote and improve the public schools, also to foster higher education.

Much is hoped from the labors of the exploring expedition equipped and sent out by Sir Martin Conway. The leader of the expedition, John W. Evans, the geologist, John Turle, and the surveyor, G. W. Watney, sailed from England, June 26, 1901. Later they were joined by scientists from the United States and the party proceeded to explore certain regions of Bolivia that are unmapped and but little known. Scientific collections will be gathered for museums in Europe and America.

BRAZIL.-On Jan. 1, 1901, the total national debt of Brazil, expressed in U. S. gold, was $440,701,893 (including the foreign funded debt and the internal gold funded debt). The foreign debt amounted to $216,057,884 in U. S. money. has recently increased its foreign indebtedness by the issue of £4,069,760 Brazilian 4 per cent. bonds, thus increasing its foreign debt from £48,123,663 to £52,193,422.

Brazil

This loan is in the nature of an investment, since it is to be expended in buying railways. The present intention of the government is to get possession of all the railroads in the country. Terms have been settled with all except four companies. It is expected that the government will have a considerable annual income from the railways.

"As to the general financial position of the Republic," says the London Economist (Feb. 22, 1902), "the Budgets for some years past have shown substantial surpluses, in place of a long run of annual deficits previous to 1897. In politics there is nothing of a disturbing nature. The Presidential election, which takes place on March 15th, is almost certain to result in the official candidate Dr. Rodrigues Alves-being returned unopposed, and as that gentleman is pledged to continue the policy of President Campos Salles [see article BRAZIL, Vol. II., p. 831], which has been so bene

ficial to Brazilian credit, the immediate future of Brazil is apparently assured."

Dr. Rodrigues Alves, who has been elected President to succeed Salles, is now Governor of the State of Sao Paulo. He is the candidate of the Republican party. He will be inaugurated Nov. 15.

BULGARIA.—After many delays and hitches in negotiations Miss Ellen M. Stone was released Feb. 23. She and her companion, Mme. Tsilka, were left by their abductors near Strumitza in Macedonia. The ransom, $72,500, was paid some time before. It is not yet known what action the U. S. government will take. It is rumored that Turkey will be required to repay the money paid to the brigands and to punish them. It is asserted that the capture of Miss Stone was the result of a plot of Macedonian revolutionists.

One who was present writes of the arrival of the ransom at Djuma-i-bala as follows: "The Commandant and Saaddetdin Bey headed the procession on prancing Arab steeds, and they were followed by ten travel-stained troopers, a belt of cartridges round each man's waist, and a rifle laid across his saddle. Next came three carriages, ramshackle conveyances, all drawn by four horses. The first was closed, but through the dusty windows we saw a pile of cases roped and wrapped in sacking. The second carriage contained the men who had brought it from Constantinople-the second Dragoman of the American Legation and the Deputy American Consul, with the Montenegrin Cavasse. The third carriage held Messrs. Guarjoulo and Peet, and beside the driver sat another Cavasse in a gorgeous blue and gold uniform. Captain Teffik Bey, the commander of the guard, rode alongside, and behind him fifteen more troopers on jaded steeds. As the procession entered the town the side alleys were packed with inquisitive women, their yashmaks drawn tight over their faces, their children clinging to the ample folds of their trousers. The soldiers walked alongside the cavalcade talking to their comrades of the escort until an officer ordered them back. At every door and window fez tassels trembled with excitement. The clatter of horses' feet and the clank of sabres filled the air as the procession groped its way through the dark and ill-paved streets of the bazaar." (See illustration, page 1082).

Prince Ferdinand left Sofia Feb. 15 for

Mentone. The Council of Ministers has been invested with the Regency.

Statistics of Bulgaria's foreign trade in 1901 make a favorable showing. The total value is 152,813,832 francs, as compared with 100,324,729 francs in 1900. The value of imports is 70,044,073 francs, against 46,342,100 francs in 1900, an increase of 51 per cent.; exports, 82,769,759 francs, against 53,982,629 francs in 1900, an increase of 53 per cent. The balance of trade is in favor of Bulgaria to the extent of 12,725,686 francs. The exports to England, Turkey, Belgium, and Germany have largely increased.

CHILE.-The sale of the Transandine Railway took place in August, 1901. The company acquiring control is represented by W. R. Grace & Co., of New York. Thirty years have passed since the original concession was granted, and various delays have hindered the work of construction. Financiers hope for a speedy completion of this line, which will shorten the trip from Chile to the eastern ports of the United States. It will effect a saving of twenty days in the journey between Chile and Europe.

Chile's navy is the strongest of South American navies after that of Argentina. The government has lately bought some torpedo destroyers in England. The fighting vessels are four armored ships, four deck-protected cruisers, and three torpedo gunboats.

The following paragraphs are from the Bulletin of the Bureau of the American Republics, January, 1902:

"A comparative examination of the commerce of Chile with foreign trade nations shows that during the ten years intervening from 1891 to 1900 the balance of trade has been in favor of the Republic, the imports during the decade being represented by 1,335,964,480 and the exports by 1,523,032,751 pesos. The principal countries from which the imports were received in 1900 were Great Britain, Germany, United States, Australia, France, and Peru, in the order named. The total foreign commerce of Chile for the year was valued at $296,212,777 (Chilean currency), of which $128,538,142 represented the value of imports and $167,674,635 the exports. The exports to the United States, according to United States figures, during the fiscal year 1901 were valued at $8,645,604, as compared