(1) Secret liens may be outlawed in harmony with the expressed will of Congress and the desire of the commercial world generally,

(2) Loans on accounts be opened to healthy competition by making them safe to lenders at low rates who cannot safely risk the hazards which exist in States where there is no means of discovering (as by a recording statute) where the assignment relied upon as paramount is in fact paramount.

You may be interested in knowing that the American Bankers Association at its meeting in Chicago in September 1918 adopted the following resolution: 'Resolved, That the American Bankers Association favor, and the committee on State legislation is authorized, to draft and urge, through State organizations, the passage of a uniform statute to prevent fraud in the transfer of accounts receivable by secret transfers."

Furthermore, at the same convention, the national bank division of the American Bankers Association adopted the following resolution:

"Whereas, an enormous volume in the aggregate of commercial credit is being dissipated or utilized only imperfectly in the form of secretly assigned accounts, a condition which constitutes a menace alike to sound merchandising and to sound commercial banking, and one in which a very large measure of added safety and flexibility can be achieved by the substitution of trade and bankers acceptances in the place of open-book accounts, whether assigned or unassigned, secretly or openly: therefore, be it

"Resolved by the national bank section of the American Bankers Association, That this convention expresses its unqualified disapproval of the practice of secretly assigning accounts and accords its hearty endorsement to the growing practice of substituting trade acceptances for open-book accounts wherever and whenever the conditions of the industry, business or transaction permits of such substitution, and be it further

"Resolved, That when because of some local or temporary situation the assignment of an account becomes necessary or advisable, it shall become legally incumbent upon the parties concerned, to record such assignment with the appropriate local office of record."

Your attention is directed to the fact that neither of these resolutions has ever been rescinded by the American Bankers Association.

Sincerely yours,

[H. R. 5693, 80th Cong., 2d sess.]

R. S. DOUGLAS, Counsel.

A BILL To amend an Act entitled "An Act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1898, and Acts amendatory thereof and supplementary thereto; and to repeal subdivision b of section 64 and subdivision b of section 70 thereof and all Acts and parts of Acts inconsistent therewith

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That (a) paragraph (24) of section 1 of the Act entitled "An Act to establish a uniform system of bankruptcy throughout the United States," approved July 1, 1898, as amended, is amended to read as follows: "(24) 'Petition' shall mean a document filed in a court of bankruptcy or with a clerk thereof initiating a proceeding under this Act;". (b) Paragraph (30) of such section is amended to read as follows:

"(30) "Transfer' shall include the sale and every other and different mode, direct or indirect, of disposing of or of parting with property or with an interest therein or with the possession thereof or of fixing a lien upon property or upon an interest therein, absolutely or conditionally, voluntarily or involuntarily, by or without judicial proceedings, as a conveyance, sale, assignment, payment, pledge, mortgage, lien, encumbrance, gift, security, or otherwise; the retention of a security title to property delivered to a debtor shall be deemed a transfer suffered by such debtor;". SEC. 2. Paragraph (21) of subdivision a of section 2 of such Act, as amended, is amended to read as follows:

"(21) Require receivers or trustees appointed in proceedings not under this Act, assignees for the benefit of creditors, and agents authorized to take possession of or to liquidate a person's property to deliver the property in their possession or under this control to the receiver or trustee appointed under this Act or, where an arrangement or a plan under this Act has been confirmed and such property has not prior thereto been delivered to a receiver or trustee appointed under this Act, to deliver such property to the debtor or other person entitled to such property according to the provisions of the arrange

ment or plan, and in all such cases to account to the court for the disposition by them of the property of such bankrupt or debtor: Provided, however, That such delivery and accounting shall not be required, except in proceedings under section 77 and chapters X and XII of this Act, if the receiver or trustee was appointed, the assignment was made, or the agent was authorized more than four months prior to the date of bankruptcy. Upon such accounting, the court shall reexamine and determine the propriety and reasonableness of all disbursements made out of such property by such receiver, trustee, assignee, or agent, either to himself or to others, for services and expenses under such receivership, trusteeship, assignment, or agency, and shall, unless such disbursements have been approved, upon notice to creditors and other parties in interest, by a court of competent jurisdiction prior to the proceeding under this Act, surcharge such receiver, trustee, assignee, or agent the amount of any disbursement determined by the court to have been improper or excessive." SEC. 3. Clause (8) of subdivision a of section 7 of such Act, as amended, is amended to read as follows:

"(8) prepare, make oath to, and file in court within five days after adjudication, if an involuntary bankrupt, and with his petition, if a voluntary bankrupt, a schedule of his property, showing the amount and kind of property, the location thereof and its money value, in detail; and a list of all his creditors, including all persons asserting contingent, unliquidated, or disputed claims, showing their residences or places of business, if known, or if unknown that fact to be stated, the amount due to or claimed by each of them, the consideration thereof, the security held by them, if any, and what claims, if any, are contingent, unliquidated, or disputed; and a claim for such exemptions as he may be entitled to; all in triplicate, one copy for the clerk, one for the referee, and one for the trustee: Provided, however, That the court may for cause shown grant further time for the filing of such schedules if, with his petition in a voluntary proceeding or with his application to have such time extended in an involuntary proceeding, the bankrupt files a list of all such creditors and their addresses;":

SEC. 4. Subdivision a of section 11 of such Act, as amended, is amended to read as follows:

"a. A suit which is founded upon a claim from which a discharge would be a release, and which is pending against a person at the time of the filing of a petition by or against him, shall be stayed until an adjudication or the dismissal of the petition; if such person is adjudged a bankrupt, such action may be further stayed until the question of his discharge is determined by the court after a hearing, or by the bankrupt's filing a waiver of, or having lost, his right to a discharge, or, in the case of a corporation, by its failure to file an application for a discharge within the time prescribed under this Act: Provided, however, That such stay shall be vacated by the court if, in a proceeding under this Act commenced within six years prior to the date of the filing of the petition in bankruptcy, such person has been granted a discharge, or has had a composition confirmed, or has had an arrangement by way of composition confirmed, or has had a wage earner's plan by way of composition confirmed."

SEC. 5. (a) Clause (5) of subdivision c of section 14 of such Act, as amended, is amended to read as follows: "or (5) in a proceeding under this Act commenced within six years prior to bankruptcy been granted a discharge, or had a composition or an arrangement by way of composition or a wage earner plan by way of composition confirmed under this Act;".

(b) Subdivision e of such section is amended to read as follows:

"e. If the bankrupt fails to appear at the hearing upon the objections to his application for a discharge, or having appeared refuses to submit himself to examination, or if the court finds after hearing upon notice that the bankrupt has failed without sufficient excuse to appear and submit himself to examination at the first meeting of creditors or at any meeting specially called for his examination, he shall be deemed to have waived his right to a discharge, and the court shall enter an order to that effect."

SEC. 6. Subdivision a of Section 18 of such Act, as amended, is amended to read as follows:

"a. Upon the filing of a petition for involuntary bankruptcy, service thereof, with a writ of subpena, shall be made upon the person therein named as defendant. Upon the filing of a voluntary petition in behalf of a partnership by less than all of the general partners, service thereof, with a writ of subpena, shall be made upon the general partner or partners not parties to the filing of such petition.

Such service shall be returnable within ten days, unless the court shall, for cause shown, fix a longer time, and shall be made at least five days prior to the return day, and in other respects shall be made in the same manner that service of such process if had upon the commencement of a civil action in the courts of the United States; but in case personal service cannot be made within the time allowed, then notice shall be given by publication in the same manner as provided by law for notice by publication in suits to enforce a legal or equitable lien in courts of the United States, except that, unless the court shall otherwise direct, the order shall be published only once and the return day shall be five days after such publication."

SEC. 7. Subdivision k of section 21 of such Act, as amended, is amended to read as follows:

"k. In all proceedings under this Act, the parties in interest shall be entitled to all rights and remedies granted by the Rules of Civil Procedure for the District Courts of the United States established from time to time by the Supreme Court pertaining to discovery, interrogatories, inspection and production of documents, and to the admission of execution and genuineness of instruments: Provided, however, That the limitations of time therein prescribed may be shortened by the court to expedite hearings."

SEC. 8. Subdivision d of section 29 of such Act, as amended, is amended to read as follows:

"d. A person shall not be prosecuted for any offense arising under this Act unless the indictment is found or the information is filed in court within three years after the commission of the offense: Provided, however, That in the case of the offense of concealment of assets of a bankrupt the period of limitations herein shall not begin to run until the question of the bankrupt's discharge is determined by the court after a hearing, or by the bankrupt's filing a waiver of, or having lost, his right to a discharge."

SEC. 9. Clause (9) of subdivision a of section 39 of such Act, as amended, is amended to read as follows:

"(9) transmit forthwith to the clerks all bonds filed with and approved by them, the originals of all orders made by them granting adjudications or dismissing the petitions as provided in this Act, and certified copies of all orders made by them, granting, denying, or revoking discharges, confirming or refusing to confirm, or setting aside the confirmation of, arrangements or wage earner plans, and reinstating the proceedings or cases;".

SEC. 10. Subdivision a of section 42 of such Act, as amended, is amended to read as follows:

"a. The records of all proceedings in each case before a referee shall be kept in the manner as prescribed by the Supreme Court of the United States."

SEC. 11. (a) Subdivision j of section 57 of such Act, as amended, is amended to read as follows:

"j. (1) Debts owing to the United States or to any State or any subdivision thereof as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued on the amount of such loss up to the date of bankruptcy.

"(2) Except where the estate of the bankrupt is solvent, interest accruing after the date of bankruptcy on taxes legally due and owing to the United States or to any State or any subdivision thereof shall not be allowed."

(b) Subdivision n of such section is amended to read as follows: "n. Except as otherwise provided in this Act, all claims provable under this Act, including all claims of the United States and of any State or any subdivision thereof, shall be proved and filed in the manner provided in this section. Claims which are not filed within six months after the first date set for the first meeting of creditors shall not be allowed: Provided, however, That the court may, upon application before the expiration of such period and for cause shown, grant a reasonable fixed extension of time for the filing of claims by the United States or any State or any subdivision thereof: Provided further, That the right of infants and insane persons without guardians, without notice of the bankruptcy proceedings may continue six months longer: And further provided, That a claim arising in favor of a person by reason of the recovery by the trustee from such person of money or property, or the avoidance by the trustee of a lien held by such person, may be filed within thirty days from the date of such recovery or avoidance, but if the recovery is by way of a proceeding in which a final judgment has been entered against such person, the claim shall not be allowed if the money is not paid

or the property is not delivered to the trustee within thirty days from the date of the rendering of such final judgment, or within such further time as the court may allow. When in any case all claims which have been duly allowed have been paid in full, claims not filed within the time hereinabove prescribed may nevertheless be filed within such time as the court may fix or for cause shown extend and, if duly proved, shall be allowed against any surplus remaining in such case." SEC. 12. Clause (8) of subdivision a of section 58 of such Act, as amended, is amended to read as follows:

"(8) all applications by receivers, ancillary receivers, marshals, trustees, committees, and attorneys for compensatoin from the estate for services rendered, specifying the amount and by whom made: Provided, however, That where a creditors' committee has been appointed pursuant to this Act, the notice required by clauses (1), (4), and (6) of this subdivision shall be sent to only such committee and to the creditors who have filed with the court a demand that all notices under this subdivision be mailed to them." SEC. 13. Subdivision a of section 60 of such Act, as amended, is amended to read as follows:

"a. A preference is a transfer, as defined in this Act, of any of the property of a debtor to or for the benefit of a creditor for or on account of an antecedent debt, made or suffered by such debtor while insolvent and within four months before the filing by or against him of the petition initiating a proceeding under this Act, the effect of which transfer will be to enable such creditor to obtain a greater percentage of his debt than some other creditor of the same class. For the purposes of subdivisions a and b of this section, a transfer shall be deemed to have been made at the time when it became so far perfected that no bona fide purchaser from the debtor and no creditor could thereafter have acquired any rights in the property so transferred superior to the rights of the transferee therein, and, if such transfer is not so perfected prior to the filing of the petition initiating a proceeding under this Act, it shall be deemed to have been made immediately before bankruptcy."

SEC. 14. Subdivision c of section 63 of such Act, as amended, is amended to read as follows:

"c. Notwithstanding any State law to the contrary, the rejection of an executory contract or unexpired lease, as provided in this Act, shall constitute a breach of such contract or lease as of the date of the filing of the petition initiating a proceeding under this Act."

SEC. 15. (a) Clause (1) of subdivision a of section 64 of such Act, as amended, is amended to read as follows:

"(1) the actual and necessary costs and expenses of preserving the estate subsequent to filing the petition; the fees for the referees' salary fund and for the referees' expense fund; the filing fees paid by creditors in involuntary cases or by persons other than the bankrupt in voluntary cases; where property of the bankrupt, transferred or concealed by him either before or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the cost and expense of one or more creditors, the reasonable costs and expenses of such recovery: the costs and expenses of administration, including the trustee's expenses in opposing the bankrupt's discharge or in connection with the criminal prosecution of an offense punishable under this Act or an offense concerning the business or property of the bankrupt punishable under other laws, Federal or State; the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases and to the bankrupt in voluntary and involuntary cases, as the court may allow: Provided, however, That where an order is entered in a proceeding under any chapter of this Act directing that bankruptcy be proceeded with, the costs and expenses of administration incurred in the ensuing bankruptcy proceeding shall have priority in advance of payment of the unpaid costs and expenses of administration, including the allowances provided for in such chapter, incurred in the superseded proceeding and in the suspended bankruptcy proceeding, if any".

(b) Subdivision b of such section is hereby repealed.

SEC. 16. (a) Paragraph (1) of subdivision a of section 67 of such Act, as amended, is amended to read as follows:

"a. (1) Every lien against the property of a person obtained by attachment, judgment, levy, or other legal or equitable process or proceedings within four

months before the filing of a petition initiating a proceeding under this Act by or against such person shall be deemed null and void (a) if at the time when such lien was obtained such person was insolvent or (b) if such lien was sought and permitted in fraud of the provisions of this Act: Provided, however, That if such person is not finally adjudged a bankrupt in any proceeding under this Act and if no arrangement or plan is proposed and confirmed, such lien shall be deemed reinstated with the same effect as if it had not been nullified and voided."

(b) Paragraph (2) of subdivision a of such section is amended to read as follows: (2) If any lien deemed null and void under the provisions of paragraph (1) of this subdivision a, has been dissolved by the furnishing of a bond or other obligation, the surety on which has been indemnified directly or indirectly by the transfer of or the creation of a lien upon any of the nonexempt property of a person before the filing of a petition initiating a proceeding under this Act by or against him, such indemnifying transfer or lien shall also be deemed null and void: Provided, however, That if such person is not finally adjudged a bankrupt in any proceeding under this Act, and if no arrangement or plan is proposed and confirmed, such transfer or lien shall be deemed reinstated with the same effect as if it had not been nullified and voided."

(c) Subdivision b of such section is amended to read as follows:

"b. The provisions of section 60 of this Act to the contrary notwithstanding, statutory liens in favor of employees, contractors, mechanics, landlords, or other classes of persons, and sta utory liens for taxes and debts ownig to the United States or to any State or any subdivision thereof, created or recognized by the laws of the United States or of any State, may be valid against the trustee, even though arising or perfected while the debtor is insolvent and within four months prior to the filing of the petition initiating a proceeding under this Act, by or against him. Where by such laws such liens are required to be perfected and arise but are not perfected before bankruptcy, they may nevertheless be valid, if perfected within the time permitted by and in accordance with the requirements of such laws, except that if such laws require the liens to be perfected by the seizure of property, they shall instead be perfected by filing notice thereof with the court.

(d) Subdivision c of such section is amended to read as follows:

"c. Where not enforced by sale before the filing of a petition initiating a proceeding under this Act, though valid under subdivision b of this section, statutory liens, including liens for taxes or debts owing to the United States or to any State or any subdivision thereof, on personal property not accompanied by possession of such property, and liens, whether statutory or not, of distress for rent shall be postponed in payment to the debts specified in clauses (1) and (2) of subdivision a of section 64 of this Act and, except as against other liens, such liens for wages or for rent shall be restricted in the amount of their payment to the same extent as provided for wages and rent respectively in subdivision a of section 64 of this Act."

(e) Paragraph (2) of subdivision d of such section is amended to read as follows: "(2) Every transfer made and every obligation incurred by a debtor within one year prior to the filing of a petition initiating a proceeding under this Act by or against him is fraudulent (a) as to creditors existing at the time of such transfer or obligation, if made or incurred without fair consideration by a debtor who is or will be thereby rendered insolvent, without regard to his actual intent; or (b) as to then existing creditors and as to other persons who become creditors during the continuance of a business or transaction, if made or incurred without fair consideration by a debtor who is engaged or is about to engage in such business or transaction, for which the property remaining in his hands is an unreasonably small capital, without regard to his actual intent; or (c) as to then existing and future creditors, if made or incurred without fair consideration by a debtor who intends to incur or believes that he will incur debts beyond his ability to pay as they mature; or (d) as to then existing and future creditors, if made or incurred with actual intent as distinguished from intent presumed in law, to hinder, delay, or defraud either existing or future creditors."

(f) Paragraph (3) of subdivision d of such section is amended to read as follows: (3) Every transfer made and every olbigation incurred by a debtor within four months prior to the filing of a petition initiating a proceeding under this Act by or against him is fraudulent, as to then existing and future creditors, if made or incurred with intent to use the consideration, obtained for the transfer or obligation, to effect a preference to a third person voidable under section 60 of this Act. The remedies of the trustee for the avoidance of such transfer or obligation and of such preference shall be cumulative: Provided, however, That the trustee shall be entitled to only one satisfaction with respect thereto."