submitted to the creditors, who are asked to file their claims with the bureau, which gives the debtor a release as soon as the property is assigned to it. The bureau collects the outstanding receivables, takes charge of the assets, and disposes of them to the best advantage in one of three ways: 1. It may sell them at public auction. 2. It may sell the stock in relatively small quantities to buyers of bankruptcy stocks and to storekeepers at private sale, which is usually superior to public auctions. 3. It may continue the business and gradually dispose of the stock at retail, should the nature of the business warrant it. In this manner higher prices may be realized on the stock. The only drawback to this method of procedure, aside from the requisite waiting until all the stock has been disposed of before any dividends are paid, is the necessity of furnishing additional merchandise to replenish the stock in order to meet the demand of the trade. Irrespective of the method followed in disposing of the insolvent's estate, creditors are, as a rule, compelled to wait at least four months after assignment before they are paid any dividends. The reason for such delay lies in the unwillingness and inability of adjustment bureaus to assume any risk in case previously unheard-of creditors appear and demand payment after the estate has been wound up but before the four months' period has elapsed. A petition in bankruptcy could be filed by these creditors, the assignment set aside as a preference, and the adjustment bureau compelled to account for all sums received from the sale of the bankrupt's assets. Should dividends be disbursed immediately, the bureau would find itself in an embarrassing position. It is for this reason that no payments are made by the bureau until the expiration of at least four months from the date of the assignment. Should it develop that the debtor has not been fair to his creditors, and if these creditors should on this account refuse to consent to the friendly liquidation, bankruptcy is the inevitable result. This rarely happens, unless there are some legal complications or suspicion of fraud. Bankruptcy proceedings may also become unavoidable because the debtor himself has filed a voluntary petition. Under such circumstances the bureau acts in an advisory capacity and represents creditors at their meetings, and particularly in the election of a trustee. The bureau itself frequently acts as trustee in bankruptcy through one of its representatives, and a large majority of the credit grantors file their claims with it, primarily, because they have a disinterested party act as trustee, and, secondarily, because it helps to keep the estate out of the hands of "bankruptcy rings" or persons who sometimes see "good picking" in insolvent estates. "Bankruptcy rings" have been organized in some large trade centers with the object of obtaining control of the assets of bankrupt estates. When creditors cooperate through the adjustment bureaus, these rings find themselves powerless. In this manner alone, bureaus have saved large sums of money in preventing estates from falling into their clutches. Another purpose of the bureaus is to investigate bankruptcies where there is a suspicion of fraud. As soon as sufficient evidence is obtained to warrant action, the facts are presented to the grand jury, the Department of Justice, or other authorities. These bureaus cooperate with the Investigation and Prosecution Department maintained by the National Association of Credit Men. This part of their activities serves to protect not only their members but also honest debtors to whom the members sell. Advantages of Adjustment Bureaus.-The bureaus are instruments for the adjustment and liquidation of insolvent estates and for the reorganization of embarrassed concerns by creditors themselves, who are more directly and deeply interested in economical administration and the elimination of waste and unnecessary expense. It is but natural that insolvent estates should be liquidated to better advantage by creditors than by a court and individuals who have nothing at stake. Adjustment bureaus usually have skilled appraisers and competent attorneys and merchandising men to place in charge of the affairs of insolvent debtors. In addition, they keep in touch with special avenues through which merchandise inventories can be disposed of regularly to greatest advantage. The charges seldom exceed 7 per cent of the amount distributed as dividends, except where special services of an unusual character are rendered. Average returns to creditors from friendly liquidations conducted by the bureaus compare very favorably with amounts secured through bankruptcy proceedings, the former varying from 50 to 60 per cent, whereas the latter approximates 25 to 30 per cent on the average. In many instances, dividends distributed by the bureaus have amounted to the full amount of the claims. Even in bankruptcy cases the presence of the bureaus has resulted in higher dividends and in more economical administration. Another advantage of friendly adjustments through the bureaus is the equal division of economically closed estates among all creditors ratably, which they aim to attain. It gives a better return than does a policy of enforcing an undue advantage on the part of a few obstreperous creditors by threat to disturb a proposed adjustment. The tendency to bring about concerted action and to develop cooperation among credit grantors is a third advantage of the bureaus. The value of such cooperation and harmony in our complex system has already been sufficiently demonstrated by the experiences of numerous concerns. A fourth advantage lies in the constructive features of their work. Some of them already are concentrating their attention and energy to analyzing, solving, and prescribing for the commercial ills encountered by unfortunate but honest debtors. In addition to the normal functions of collecting accounts, investigating commercial crooks, and liquidating insolvent estates, responsible and progressive bureau managers feel the responsibility of making adequate diagnoses and of applying proper remedies so that the weak concerns may be rehabilitated and their assets saved and preserved. By reason of their superior organization and wide experience in dealing with embarrassed or insolvent concerns, adjustment bureaus are well qualified to offer such assistance as is needed in order to extricate honest and deserving debtors from their present difficulties. Finally, there is the advantage of combating commercial crooks and frauds by keeping under vigilant observation all activities of merchants who have in mind fraudulent failures. Because of these advantages, adjustment bureaus everywhere are growing in number and importance. Both debtor and creditor are beginning to realize that these organizations are vitally interested in the welfare of both and work to their mutual advantage. Example of Friendly Adjustments.-An excellent example of what an adjustment bureau can accomplish in the handling of an estate which was apparently so badly involved as not to admit of any reorganization is afforded by a recent case handled by the Adjustment Bureau of the Chattanooga Association of Credit Men. No less than 482 creditors, many of whom were located at a distance, were interested in the insolvency, involving claims amounting to $220,701.68. The interesting feature of it all is that the bureau succeeded in convincing all of the 482 creditors that it was the proper medium through which to act and all consequently agreed to the same proposition. In order to prevent some creditors from forcing the concern into bankruptcy, no assignment or transfer of the property was made to the bureau. Instead, the merchandise and fixtures were sold in bulk and after the legal notice had been sent out by the purchaser, a meeting of the principal creditors and the debtors was called. The seller, in writing, gave at that meeting a creditors' committee, appointed for the purpose, full powers to liquidate the affairs. As a result, the liquidation of this large estate involved an expenditure on the part of the bureau of 2 per cent of all claims, the case was kept out of the courts, and the creditors have already received at the time of this writing 65 per cent on their claims. Such large dividends secured at such a ridiculously low expense are possible only by the cooperation of creditors through an efficient adjustment bureau operating not for profit and in behalf of all the creditors. SELECTED REFERENCES BREWSTER, S. F.: "Legal Aspects of Credit," Pt. VII, chap. 37. CASSELL, R. J.: "Constructive Collecting," chap. 11. ETTINGER, R. P., and GOLIEB, D. E.: "Credits and Collections," chap. 16. HAGERTY, J. E.: "Mercantile Credit," Pt. I, chap. 11. 2 MCCALLUM, J. H., "When 482 Creditors Agree," The Credit Monthly, Nov. 1923, pp. 12-13. CHAPTER XXV ASSIGNMENTS AND RECEIVERSHIPS ASSIGNMENTS Nature of Assignments.-Assignments for the benefit of creditors are voluntary transfers in trust by debtors of some or all of their property to an assignee for the purpose of applying such assets or the proceeds thereof to the payment of some or all of their debts and returning the surplus, if any is available, to the assignor. Every state has some form of law whereby property may be turned over by a debtor to an assignee for the purpose of sale and division among the assignor's creditors pro rata. The power or right to assign property in trust for the benefit of creditors is recognized and approved by the various state and Federal courts, except that assignments may be set aside on the ground of fraud or when used as a preference under bankruptcy proceedings. Assignments are generally resorted to by debtors who, because of insolvency, find themselves unable to pay their obligations in full or to continue in business. Advantages of Assignment.-Although assignments on behalf of and for the benefit of creditors are a form of legal process similar to bankruptcy, they possess, nevertheless, several advantages of friendly adjustments. Considerably less publicity is attached to this form of settlement than to bankruptcy proceedings, requiring only notice to the creditors; otherwise, the administration of the assignment is practically private. Furthermore, creditors may conduct the business as they see fit and dispose of the estate to the greatest advantage, since there is no definite time limit in which settlement must be made, although in some states the judge may grant an order directing the assignee to show cause within a specified number of days why a sale of the assets should not be had or why dividends should not be paid and a settlement of the account arrived at. It is not necessary, however, to dispose of the property at a forced sale and, consequently, at a great discount, as in case of bank |