Excerpt from The Bankruptcy Reform Act, Vol. 1: Hearings Before the Subcommittee on Improvements in Judicial Machinery of the Committee on the Judiciary, United States Senate, Ninety-Fourth Congress, First Session on S. 235 and S. 236; February 19, 20; March 12, 13; April 16, 17, 24, 1975

The United States Bankruptcy Administration would take over not only the administrative functions now performed by referees but also most of the func tions now performed by receivers and trustees. AS previously indicated, these officers collect assets, reduce them to cash, and distribute the proceeds to creditors and perform other ministerial functions subject to court supervision. The Com mission's proposal contemplates a permanent staff of qualified people located in Offices scattered throughout the United States at places where they can best carry out their functions and subject to managerial control that will insure efficiency and uniformity of action. The option would be reserved to creditors to elect a trustee, however, if a majority of creditors who vote on this matter in response to the first notice to creditors and who constitute holders of at least 35% in amount of all claims vote for the holding Of a meeting to elect a trustee. At such a meeting of creditors holding at least 35% in amount of all claims, a majority of the creditors voting may elect a trustee. If not displaced by an elected trustee, the administrator would thus combine the receiver's, the trustee's, and the referee's administrative functions, but if any dispute arises or if any creditor or the debtor or Other party in interest wishes to contest action taken by the administrator, he may take the matter by complaint to the bankruptcy court. The premise of this recommendation regarding the displacement of appointed and elected trustees is that there is now a great deal of inefficiency in the system; worse, there is in many locales operation of the system for the apparent benefit Of its functionaries rather than the debtor and creditors who are supposed to be served by it. There is a great deal of maneuvering and competition by solicitors for proxies to control the selection of trustees in business bankruptcies. Under the system as it now operates, a holder Of a few proxies, not infrequently a lawyer, will elect the trustee, who will typically name the holder of the proxies to be his attorney. In a subsequent case the holder of the proxies that were voted for the trustee in the earlier case will himself be elected trustee by the holder of multiple proxies, and he will then name as his attorney the person selected as trustee in the previous case who now holds the proxies that elected the trustee in the subsequent case. The repetition of this phenomenon in a number of cities has given rise to a wide spread belief among lawyers not engaged in bankruptcy practice and in the com mercial community at large that the system is manipulated and Operated for the benefit of the lawyers. Auctioneers, appraisers, and other members of a bankruptcy ring. The Commission believes that the establishment Of an ad ministrative agency subject to managerial and auditing and accounting controls will achieve efficiency, economy, uniformity, and integrity Of administration.

About the Publisher

Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com