The Ashburton Guardian. Magna Est Veritas et Prevalebit. SATURDAY, MAY 26, 1883. Our Bankruptcy Laws.

Ashburton Guardian, Volume IV, Issue 953, 26 May 1883, Page 2

The Ashburton Guardian. Magna Est Veritas et Prevalebit. SATURDAY, MAY 26, 1883. Our Bankruptcy Laws.

It would appear from the positive assurances of those who profess to be in the secrets of the Cabinet that the Government do really intend to introduce a Bankruptcy Bill into the General Assembly next session. A similar promise has been made during the last two or three years just about the commencement of the session, but the pressing exigencies of political affairs —the annual struggle of the Ministry for existence—has caused the Bankruptcy Bill to be put off to a more convenient season. Between the sessions the various Chambers of Commerce have been in full blast over the subject of bankruptcy, and been passing long series of contradictory resolutions, almost the sole point of agreement between the different Chambers being the necessity of making the bankruptcy laws more stringent. And while the crude and one-sided nature of many of the proposals made fay the Chambers is apt to provoke a smile, seeing that these bodies, as a rule, regard the wholesale creditor as the only being who possesses any rights worth considering, yet we heartily concur with the Chambers.that the existing bankruptcy law is far too lenient towards the debtor. It offers no terrors whatever to the insolvent, however deeply involved he may be, however dishonest his conduct, provided he has only kept outside the boundaries of the criminal law. He may even have stepped within the boundaries and still file his schedule with unfaltering hand, if only he has been wise enough to get rid ot the whole of his property; because, if he has done that, his creditors are little likely to put their hands into their pockets for the purpose of paying the expenses of a prosecution, and in ninety-nine cases out of a hundred he will go scot free. A facetious sort of document, issued from the office of the Department of Justice, adorns the walls of the different Courthouses in the colony, informing all and sundry that the costs of prosecutions under the Fraudulent Debtors Act are payable out of the fraudulent debtors’ estates. This is all very well in its way, but it would be more interesting to creditors and probably more conducive to the ends of justice, if creditors were told that the Government would defray the costs of such prosecutions, when the funds of the estate run short. We really do not see why the Government should not pay these expenses. If a man steals a watch he is prosecuted at the public expense, but if he defrauds his creditors out of hundreds, or perhaps thousands of pounds, they are required to bear the costs of the prosecution themselves. The cause of the distinction made between the two cases is one of those legal conundrums which the ordinary mind is quite unable to solve. When a debtor is being pressed by,his creditors for payment of his account, it is the commonest thing possible for the debtor to say, “ If you sue me I shall file.” He holds “ the Act ” in terrorem over the head of his creditor, and the latter usually surrenders at discretion. In former times, and in other lands, the creditor used to threaten his debtor with “ the Act.” We are now at the Antipodes, and have reversed the old order of things. The Bankruptcy Court was formerly a place of purgatory, where men suffered real punishment for their financial sins; in New Zealand we have made it a land of rest for the weary, whence, after a few forms and ceremonies have been gone through, which, under ordinary circumstances," can be managed in a few weeks, the refugee can emerge freed from his financial burdens, and with scarcely an unpleasant thought to trouble him. We cannot think that a bankruptcy law can be framed on a sound basis when a debtor is able to use it as an ordinary weapon of defence against his creditors. The Bankruptcy Court should be a place which no man would willingly have anything to do with. It should not be a matter of course that a man filing a schedule containing on the one side a long list of debts, and on the other no assets, should get his discharge without any questions asked. This, we believe, to be the radical defect of the present Act. In most Bankruptcy Acts it has been required that the debtor’s estate should pay so much in the pound, to entitle him to his 'discharge; otherwise the debtor has been called upon to show cause why his discharge should be granted; whereas, under the New Zealand law as it stands, a bankrupt can get his discharge without paying a farthing of dividend, and no creditor can prevent him, unless he proves that the bankrupt has been guilty of fraud, or has kept no books or done some one of those things which the Court thinks sufficient to warrant it in suspending the ordqr pf discharge. In other words, the spirit of the Act is carried out and the onus of proof devolved from the debtor to the creditor. This is essentially vicious. The obvious policy of a bankruptcy law should be to bring the affairs of a into the Bankruptcy Court as soon as he is fairly insolvent, so that the creditors may get as large a dividend as possible; but our law offers a distinct encouragement to every insolvent to carry on as Jopg us he can, and waste his estate in trying to recover himself, until at last there is nothing left for anybody. It would be more just to creditors and no hardship to debtors if a rule were made that an order of discharge should not issue i

lentil the bankrupt had paid 6s 8d in' the unless he could show special reasons to the contrary. A dividend of six shillings and eightpence in the pound from an insolvent estate represents property of a much larger amonut in a solvent estate, owing to the sacrifice which is often made of a bankrupt’s property : on the other hand, a man whose affairs are in such a condition that his assets would not- realise more than 6s 8d in the £ of his debts, even at a forced sale, ought clearly, in justice to his creditors, to go into the Bankruptcy Court without delay. There are, of course, cases where men, by sudden misfortune, are brought to ruin; but the saving clause we have proposed, under which the Court would be empowered to grant an order of discharge even if a smaller dividend than 6s 8d in the £ were paid or no dividend at all, would cover all such exceptional cases, and prevent hardship being inflicted upon persons who had got into difficulties through no fault of their own.