The Ashburton Guardian. Magna Est Veritas et Prevalebit. TUESDAY, MAY 8, 1883. Our Bankruptcy Laws.

Ashburton Guardian, Volume IV, Issue 937, 8 May 1883, Page 2

The Ashburton Guardian. Magna Est Veritas et Prevalebit. TUESDAY, MAY 8, 1883. Our Bankruptcy Laws.

The search after a good bankruptcy law seems almost as hopeless as the search after the Philosopher’s Stone. Neither in the Mother Country nor in New Zealand is the mercantile community satisfied with the law as it stands. The Bankruptcy Acts in force in the two countries vary materially in their provisions ; but in either case the same complaint is made, that the law is used as a cloak for fraud, and that when once an estate gets into the Bankruptcy Court, the creditors receive but a small share of what is their due. It we cast our eyes over the experience of past years, we shall find that precisely the same objections were urged against former bankruptcy statutes; and that while under some Acts the debtor found his path through the Court made easier than it was under others, in no case have the creditors, as a body, admitted that justice was done to them. Hence we do not feel any lively hope that if the Bankruptcy Bill which we are promised for next session passes through the ordeal of the General Assembly and becomes law, if will produce such a change in bankruptcy proceedings as will afford complete satisfaction to all classes, and render debtor and creditor alike satisfied. The fact is, people do not like to lose their money. The feeling is a very natural one ; but it obviously stands in the way of making things pleasant to all parties. When a tradesman gets half-a-crown in the pound instead of twenty shillings, or perhaps no dividend at all, which is quite a common occurrence in this colony, he is prone to think himself hardly dealt with, and to blame everybody concerned in the administration of the estate, the Court, and the law generally. The debtor is characterised as a swindler, and possibly a lawyer’s advice is taken as to a criminal prosecution, when some unpalateable knowledge of the peculiarities of the law relating to fraudulent bankruptcy is usually obtained. Were the luckless creditor, indeed, in a fit state to review the whole matter calmly, he might be able to perceive that while the bankruptcy law is far from perfect, and much too lenient to the spendthrift and dishonest debtor, yet its defects are intensely aggravated by the reckless credit system, arising from over-competition in business, which too often leads the trader to sell and the purchaser to buy goods on credit, which the former ought never to sell to the latter except for cash. Every new-comer to New Zealand is struck with the facility with which credit is given to all and sundry. Men who apparently have not a five pound note to bless themselves with go into a store and order pounds’ worth of goods at a time, giving to the storekeeper, with the utmost sangfroid, a direction to “ chalk them up,” and the storekeeper “ chalks them up,” as a matter of course; for he knows full well that if he were to refuse the ordinary credit, some rival storekeeper would be found to be more accommodating. In due season the gentleman who has had his goods “ chalked up ” in a variety of stores files his schedule, in which the word “ nil ” appears beneath “assets,” or possibly he may admit the ownership of £lO worth of furniture : the tradesmen lose their money, and the business of “ chalking up ” begins afresh, with the Bankruptcy Court again as its termination. The system is injurious and demoralising to the last degree. It is mischievous to the tradesman, because being compelled to give such extensive credit, he requires to invest a proportionately large amount of capital in his business, while he is constantly making losses, sometimes of a serious nature. To pay interest on the undue amount of capital so locked up, and to compensate for his losses, he is compelled to raise his prices, especially to those of his customers who require long credit j while, after all, his business rests upon an unstable foundation, and he may, at the close of a bad season, find himself involved in ruin, through no want of business capacity on his part, but simply because he is a victim to a bad system of trading, which singly he is powerless to resist, although he may altogether disapprove of it. We venture to say there is not a tradesman in Ashburton who would not prefer the “ small profits and quick returns ” of a cash business to

the apparently larger, but very uncertain, gains of the system of lavish credit which prevails here as well as in other parts of New Zealand. • While customers are thus forced to pay dearer for their goods than would be the case under a more wholesome system, it has an obvious tendency to confuse people’s ideas of right and wrong when they fall into the practice of incurring debts on the mere chance of something turning up in the shape of ways and means to pay them. Extravagance of living arises, and when the portals of the Bankruptcy Court appear in sight the Court is apt to be viewed as a haven of refuge rather than as a place to be avoided. It is not so long ago since bankruptcy was looked upon as a disgrace : a man who was unfortunate enough to figure in the Gazette had little chance of ever establishing himself in business again. That useful sensitiveness is rapidly passing away; there are many persons in the colony who have become bankrupt two or three times without apparently suffering more than temporary inconvenience in their business relations; and year by year the feeling seems to be growing that no man need be ashamed of becoming a bankrupt. We freely admit that, from the manner in which business is conducted now-a-days, a man may find himself insolvent through no fault of his own, and it is necessary to be cautious before condemning anyone because he has sought shelter in the Bankruptcy Court; still we cannot but regard it as a vicious state of feeling which leads men to view lightly the obligation of paying their just debts, and, without compunction, to ask a Court of Law to release them from the liability to do so. We may amend and improve our bankruptcy law ; we may protect the honest debtor and provide more effective machinery for punishing the dishonest; we may secure, or do our best to secure, economy in the administration of estates, but until the reckless credit system now prevalent in the colony is abolished and trade conducted on a sounder basis, we shall always find the Bankruptcy Court a gigantic sore on the body politic.