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Law for Everybody (Debts due to the United States)

Debts due to the United States must be paid before all others, provided the claim be made before the settlement of the estate.

A creditor who has a lien on any part of the estate is to be paid out of that part of the estate, before the general creditors.

A chattel morgagee may sell the chattels when they become payable. Trust funds held by an assignor, goes to the owner, after being received by the assignee. Landlords have no priority for the collection of rent. The assignee must make an accounting before he can be discharged. If creditors who are duly cited fail to appear, they are nevertheless bound by the decree upon accounting.

If the assignee neglects to cite a creditor, the case may be re-opened at the former's expense.

Creditors who refuse to join in compounding with the debtor, will receive the proportion coming to them in case no composition had taken place. Creditors may inspect and examine the assignor's books and demand necessary explanations from him. The creditors may also compel the assignee to allow them to examine said books.

A debtor cannot prefer a creditor where the debt is compounded. An assignee receives a commission of five per cent. of the sum which passes into his hands, and, even if a lawyer, he cannot draw any counsel fee in addition. The commission is based on the money realized from the assigned property, not on the value of said property.

An assignee removed for misconduct will receive no commission. PREFERENCES.

The wages or salaries of employees due to them at the time of the execution of an assignment, are preferred before any other debt, and should the assets benot sufficient to meet the claims preferred they shall be applied pro rata, to the amount of each claim. But while these preferences in favor of employees are statutory, the legislature may impose conditions governing them. An employee, who had ceased to be an employee prior to the assignment, is still entitled to a preference. An employee who takes a note for the wages due him does not lose his preference, unless the note, by special agreement, be taken as payment. Certain preferences are regarded with special favor, such as those for money loaned, or in favor of accommodation acceptors, or of sureties for indemnity for future obligations, or for indorsers for claims they may be liable to incur. But claims to be afterward created cannot be preferred.

While a preference may be conditional, upon the claim being sustained, it will not hold should the creditor release the debtor.

A surviving partner who makes an assignment of the assets of the firm in good faith, may create preferences among the creditors of said firm. Corporations may create preferences, as well as individuals, provided they do not violate their charters in so doing; but an insolvent corporation cannot create preferences. Corporations of other States are not subject to this rule. Preferences by limited partnership, in contemplation of the insolvency of the firm, or any member thereof, are void.

A creditor's wife may be preferred, like other creditors, but a silent partner cannot. If creditors are preferred within two years before the petition, it bars the insolvent debtor from a discharge.

There is no statutory prohibition of preferences in Maryland, Virginia, North Carolina, South Carolina, Florida, Mississippi, Georgia, Indiana, Wisconsin, Arkansas, and New Mexico, while in nearly all the other States, preferences are deemed void, or are applied equally to the benefit of all creditors in proportion to their claims.