BANKRUPTCY SCANDALS.
D ANKRUPTCY has long been one of the most im- I/ pregnable of English abuses. It has been attacked in two ways, and in neither has the assault succeeded. The old way was to commit the business of getting in and dis- tributing the assets of the bankrupt to officials. When this had been tried for some time, it was objected, with much rea- son, that the teat of a good Bankruptcy Law was the payment in the pound ultimately received by the creditors ; and that, judged by this standard, the official system was a miserable break-down. Then it was suggested that the right plan would be to commit the business to the creditors. The officials had failed, because they had no interest in the result. Whether the bankrupt's estate yielded much or little mattered nothing to them. Fifteen shillings in the pound or fifteen pence yielded the same fees, and their work was consequently un- stimulated by any consideration of self-interest. If the creditors took the collection and distribution of assets into their own hands, the result would be quite different.
The payment in the pound is the one thing in the whole affair that they care about, and as that is also the one thing in the whole affair that matters to any one, they are obviously the right people to have the charge of the case. Nothing could be plainer on paper, but unfortunately nothing could be more fallacious in practice. Creditors ought to be the people most interested in making as much of the bankrupt's estate as it is possible to make of it, but they act as though they were, of all men, the least interested. More than this, it is very difficult to show that as men of business they are not quite right. Supposing that, by taking immense pains, it is possible to raise the per-tentage the bankrupt is able to pay by a shilling or two in the pound, it has to be remembered what is involved in taking immense pains. Immense pains mean always either that the creditors have spent a great deal of time in realising the assets, or else that they have paid some one else to spend the time for them. But neither of these alternatives is a cheap alternative. If the creditors pay to have the work well done, that means money ; and if they do the work themselves, that means time which is the same thing as money. When to this is added the worry which attends the process, it is a very doubtful question whether the creditors would gain by doing more than they do to make the existing Bankruptcy Law a reality. They might only be throw- ing good money after bad, and with the money a large amount of time and temper would also be wasted.
There is, indeed, another way of looking at the ques- tion which suggests a different conclusion. It is clearly bad that bankruptcy should be encouraged ; that there should be one end for the trader who pays his debts and the trader who pays them not ; that to become a bankrupt should, in many cases, be the easiest way out of a difficulty, and the one which a dishonest man would most naturally adopt. Yet, .so long as those who have the charge of a bankrupt's estate are in as great a hurry to settle matters as the bankrupt him- self can be in, and equally with him have as their principal feeling the desire to get the whole thing over as fast as possible, all these evils will happen. Consequently, it may be argued, it is the creditors' interest to take pains about the matter. If they do, there will still be something of which the dishonest bankrupt will stand in awe. He will fear the long-sighted selfishness of those with Whom he has to do, their knowledge that the interest of honest trade requires that bankruptcy should not be made too pleasant, and their conviction that the interest of honest trade is, in the long-run, the interest of every honest trader. Men penetrated by these feelings do not mind what trouble they take ; all that they care for is that the bank- rupt should find life sufficiently burdensome. If they can secure this they will be happy, and the way to secure it is to take a vast amount of pains in administering the bankrupt's estate. Perhaps, if Englishmen were a more vindictive race, this reasoning would have more weight with them. But, ordi- narily speaking, they are not vindictive. They are much more disposed, after the first, to leave the man who has cheated them alone. They despise him if he is a knave, they pity him if he is a fool ; but inasmuch as whichever he is he has been unsuccessful, they argue that he is not worth powder and shot. The Scotch, we believe, work their bankruptcy law better than we do ; but, if they do, the reason, we suspect, is to be found in the absence of that placableness which honour- ably, if at times inconveniently, distinguishes the English people. The Scotch have possibly a touch of persistent de- termination that the bankrupt shall not get off too easily which Englishmen lack. Whatever be the explanation of the English apathy, where bankruptcy is concerned, there can unfortunately lie no doubt either as to the fact or as to the consequence. Under a system which virtually makes creditors the Judges, bank- ruptcy is not regarded as the heinous offence which it ought to be in a commercial country.
How lightly it can come to be regarded may be seen from the Report of the Comptroller in Bankruptcy for the year 1879. This document discloses a lower depth even than ordinary bankruptcy. Last year, out of 13,132 bankruptcies, only 1,156 were bankruptcies in the strict sense of the term. The rest were " liquidations,"—bankruptcies, that is to say, in which everything is done by arrangement, without any intervention on the part of a competent tribunal. The Comptroller gives a melancholy account of the results realised by this process. They point, he says, to a " rapid and continual increase in the number of persons who, without any regard to the state of trade, continue to get rid of their debts by paying little or nothing to their creditors." There has been a large and con- tinuous increase in the worst kind of compositions, those in which the sum paid to the creditors is not more than Is. in the £1. Not unfrequently, indeed, even this slight concession to trade- feeling is omitted, and the liquidation is just sufficient to satisfy professional charges. The Comptroller's account of the way in which professional charges are run up shows that, pro- vided the assets are large enough to meet this necessary item, no great trouble is likely to be taken to make them larger. The lowest class of professional trustees " never have their bills taxed ;" they charge what they like, and they do what they like. Touting agents collect proxies from the creditors, and then hold a " knock-out " to arrange how they shall be used.
The disposition of them is conducted on a similar principle to that which regulates the distribution of the counters after a round game. Those who have only a few proxies sell them to those who have many, and who hope by buying them to make up a majority of votes. If the proxies are pretty equally divided, a joint trusteeship is arranged, or one agent becomes trustee "on the usual terms"— these terms being that, in consideration of the other agent waiving his claim, the trustee pays him a third of all he makes out of his function. The whole system apparently exists to feed a class of professional leeches. The solicitor employed looks to make his market out of the trustees whom he has got appointed. Sometimes he receives a sum of money ; sometimes his costs are paid without taxation or inquiry. The trustee, in turn, is paid by the auctioneer he employs. In fact, the case is treated throughout simply as a means of charging and paying commissions, at the cost, of course, of the creditors. The interest of the leeches in the business ceases when they have sucked their fill for themselves ; and the creditors may think themselves fortunate if, in the end, there is anything over for them to take.
The passing of an adequate Bankruptcy Bill, would make short work of this scandalous state of things ; but in the pre- sent state and prospects of Parliamentary business, it is very hard to say when an adequate Bankruptcy Bill is likely to be passed. Such a measure necessarily excites a great deal of interest, evokes a great number of suggestions, is likely to be successful in proportion as it embodies the mature views of the best class of traders, and consequently cannot be hurried through Committee. All this necessarily gives immense oppor- tunities to obstruction, if any section of the House of Commons happens to have a reason for obstructing. It would be, for example, impossible to assign any limit to the amount of legal acumen which Mr. Gorst might bring to bear upon a Bank- ruptcy Bill, when such a Bill had the misfortune to be intro- duced by those sworn foes of realised property, a Liberal Ad- ministration. Under these circumstances, it behoves a Govern- ment to be modest in the conception of its duty. If a com- plete Bankruptcy Bill is unattainable for the present, a measure dealing with the flagrant abuses denounced by the Comptroller in Bankruptcy might be pushed through Parliament. There is no need that the worst cases of bankruptcy should go on being altogether kept out of Court, that any bill whatever should be allowed to escape taxation, or that trustees should be suffered to retain any money whatever in their own hands.
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