In disposing of the property of the bankrupt, provision is made that without court order the trustee cannot sell any of the property for less than 75% of the value at which it was appraised by the court’s appraisers. The right of set-off is allowed, i.e., if the bankrupt has a claim against any of his creditors, the amount of the claim is canceled dollar for dollar against the creditor’s claim and only the balance of the claim is to be prorated on the same basis as the other creditors.
The trustee must keep a careful record of all properties disposed of by him and of all liabilities liquidated. What constitutes a careful record will depend largely on the circumstances in each case. Sometimes merely a record of cash received and disbursed will fulfill all requirements. In other cases it may be necessary to keep a full set of books in order properly to secure the information needed in the accounting to the court and the creditors. All reports made should be narrative in form rather than consisting only of formal schedules and accounts. A straightforward statement of all the activities of the trustee, supported by schedules in order to show summarized results, is the desideratum.
Liquidating Dividends
Whenever the cash in the hands of the trustee is sufficient to pay the claims of preference creditors and a 5% dividend to the unsecured creditors, a dividend must be declared. The declaration of the dividend is placed in the hands of the referee in bankruptcy who is a direct representative of the court in most bankruptcy matters. The trustee must pay the dividend within 10 days after its declaration by the referee who prepares and delivers to the trustee dividend sheets showing the dividend declared and the parties to whom payable. All dividend checks drawn by the trustee must be countersigned by the referee.
Relative Standing of the Creditors
In connection with the creditors of a receiver in equity a statement was made above of the various classes of creditors whose claims are to be satisfied. These consist of preference creditors, secured creditors, and unsecured creditors. The trustee in making his liquidating dividends will pay first those creditors who are given preference by law. Within the preference class the order of priority of claims is as follows:
1. Taxes due the government, the state, or the municipality.
2. The actual costs incurred by the trustee or receiver in the preservation of the estate subsequent to time of filing the petition in bankruptcy.
3. The filing fees paid by creditors in the case of a petition in involuntary bankruptcy.
4. The costs of administration by the trustee.