NY-DCD Debtor & Creditor Law NY

Short title. This chapter shall be known as the "Debtor and

Creditor Law."

Jurisdiction of proceedings. The term "judge" when used in this

article shall apply equally to a county judge of the county within which

the assignment is recorded and to justices of the supreme court, and the

term "court" when used in this article shall, in like manner, apply to

the county court of such county and to the supreme court. All

applications hereunder made in the supreme court shall be made to the

court, or a justice thereof within the judicial district where the

assignment is recorded, and all proceedings and hearings under this

article had in the supreme court upon the return of a citation or order

shall be had at a special term of said court held in the county where

the debtor resided at the time of the assignment, or in case of an

assignment by copartners, in the county where the principal place of

business of such copartners was at the time of such assignment, or in

the case of an assignment by a corporation in the county where the

principal office of such corporation was at the time of such assignment.

Requisites of general assignment. Every conveyance or assignment

made by a debtor of his estate, real or personal, or both, to an

assignee for the creditors of such debtor, shall be in writing, and

shall specifically state therein the residence and kind of business

carried on by such debtor at the time of making the assignment, and the

place at which such business shall then be conducted, and if such place

be in a city, the street and number thereof, and if in a village or town

such apt designation as shall reasonably identify such debtor.

Every such conveyance or assignment shall be duly acknowledged before

an officer authorized to take the acknowledgment of deeds and shall be

recorded in the county clerk's office in the county where such debtor

shall reside or carry on his business at the date thereof. An assignment

by copartners shall be recorded in the county where the principal place

of business of such copartners is situated. An assignment by a

corporation shall be recorded in the county where its principal place of

business is situated. When real property is a part of the property

assigned, and is situated in a county other than the one in which the

original assignment is required to be recorded, a certified copy of such

assignment shall be filed and recorded in the county where such property

is situated.

The assent of the assignee, subscribed and acknowledged by him, shall

appear in writing, embraced in or at the end of, or indorsed upon the

assignment, before the same is recorded, and, if separate from the

assignment, shall be duly acknowledged.

In all cases where an assignment is made by a corporation the right to

recover the amount due from stockholders on unpaid capital stock issued

to or subscribed for by them shall pass to the assignee whether

mentioned in the assignment or not.

The right of any person to payments, including tax refunds, recovery

rebates, refundable tax credits, and any advances of any tax credits,

under the federal Families First Coronavirus Response Act (FFCRA),

Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act),

Consolidated Appropriations Act of 2021, and American Rescue Plan Act of

2021 (ARPA) shall not be transferable or assignable, at law or in

equity.

Debtor's schedule. 1. A debtor making an assignment shall, at the

date thereof or within twenty days thereafter, cause to be made, and

filed with the county clerk of the county where such assignment is

recorded, and file a duplicate thereof with the assignee, an inventory

or schedule containing:

(a) The name, occupation, place of residence, and place of business,

of such debtor;

(b) The name and place of residence of the assignee;

(c) A full and true account of all the creditors of such debtor,

stating the last known place of residence or business of each, if known,

if unknown the fact to be stated, the sum owing to each, with the true

cause and consideration therefor, and a full statement of any existing

security for the payment of the same;

(d) A full and true inventory of all such debtor's estate at the date

of such assignment, both real and personal, in law and in equity, with

the incumbrances existing thereon, and the actual value of the same

according to the best knowledge of such debtor; and a claim for such

exemptions as he may be entitled to;

(e) An affidavit made by such debtor, that the same is in all respects

just and true.

2. In case such debtor shall omit, neglect or refuse to make and file

such inventory or schedule within the twenty days required, the assignee

named in such assignment shall, within thirty days after the date

thereof, cause to be made, and filed as aforesaid such inventory or

schedule as above required, in so far as he can; and for such purpose

the judge shall, at any time, upon the application of such assignee,

compel by order such delinquent debtor, and any other person to appear

before him and disclose, upon oath, any knowledge or information he may

possess, necessary to the proper making of such inventory or schedule.

The assignee shall verify the inventory and schedule so made by him, to

the effect that the same is in all respects just and true to the best of

his knowledge and belief.

3. In case the said assignee shall be unable to make and file such

inventory or schedule, within said thirty days, the judge may, upon

application upon oath, showing such inability, allow him such further

time as shall be necessary, not exceeding sixty days. If the assignee

fail to make and file such inventory or schedule within said thirty days

or such further time as may be allowed, the judge shall require, by

order, the assignee forthwith to appear before him, and show cause why

he should not be removed. Any person interested in the trust estate may

apply for such order and demand such removal. The books and papers of

such delinquent debtor shall at all times be subject to the inspection

and examination of any creditor. The judge is authorized, by order, to

require such debtor or assignee to allow such inspection or examination.

Disobedience to such order is a contempt, and obedience to such order

may be enforced by attachment.

4. The assignor shall comply with all lawful orders of the judge;

examine the correctness of all claims presented against his estate, if

ordered by the judge so to do, and if any is incorrect or false notify

his assignee thereof immediately; deliver to his assignee all his books,

papers and records; execute and deliver such papers as shall be ordered

by the judge; and execute and deliver to his assignee transfers of all

his property outside the state of New York. When so ordered by the

judge, the assignor shall attend before the assignee, a referee or the

court in the county where the assignor resides, and submit to an

examination under oath concerning the conducting of his business, the

cause of his inability to pay his debts, his dealings with his creditors

and other persons, the amount, kind and whereabouts of his property, and

all matters which may affect the administration and settlement of his

estate.

5. In any examination of the assignor ordered by the judge pursuant to

subdivision four of this section, the court may confer immunity in

accordance with the provisions of section 50.20 of the criminal

procedure law; provided, however, that no immunity shall be conferred

except upon twenty-four hours prior written notice to the appropriate

district attorney having an official interest therein.

6. The court may allow as an administrative expense one reasonable

fee, irrespective of the number of attorneys employed, for legal

services rendered to the assignor in preparing the assignment and

assisting the assignor to comply with his duties in respect of schedules

and inventory. If a debtor, in contemplation of making a general

assignment for the benefit of creditors, shall pay money or transfer

property, directly or indirectly, to an attorney for services rendered

or to be rendered in connection with the assignment, the transaction

shall be reexamined by the court on petition of the assignee or any

creditor and shall be held valid only to the extent of a reasonable

amount to be determined by the court, and the excess may be recovered by

the assignee for the benefit of the estate.

Notice to creditors to present claims. The judge may, upon the

petition of the assignee, authorize him to advertise for creditors to

present to him their claims, with the vouchers therefor, duly verified,

on or before a day to be specified in such advertisement, not less than

ten days from the publication thereof, which advertisement or notice

shall be published in one newspaper, to be designated by the judge, as

most likely to give notice to the persons to be served, at least once

and such additional times as the judge may direct; the last publication

shall be at least one week prior to the date specified.

Said verified claim of creditor shall set forth whether any, and, if

so, what securities are held for such claim, and whether any, and, if

so, what payments have been made thereon.

Whenever a claim is founded upon an instrument in writing, such

instrument, unless lost or destroyed, shall be filed with the claim.

After the claim is allowed or disallowed, such instrument may be

withdrawn by permission of the court. If such instrument is lost or

destroyed, a statement of such fact and of the circumstances of such

loss or destruction shall be filed under oath with the claim.

Bond of assignee. The assignee named in any such assignment

shall, within thirty days after the date thereof, and before he shall

have any power or authority to sell, dispose of or convert to the

purposes of the trust any of the assigned property, enter into a bond to

the people of the state of New York, in an amount to be ordered and

directed by the judge, with sufficient sureties to be approved of by

such judge, and conditioned for the faithful discharge of the duties of

such assignee, and for the due accounting for all moneys received by

him, which bond shall be filed in the clerk's office of the county where

such assignment is recorded, but in case the debtor shall fail to

present such inventory within the twenty days required, then the

assignee, before ten days thereafter shall have elapsed, may apply to

said judge by verified petition for leave to file a provisional bond,

until such time as he may be able to present the schedule or inventory

as hereinbefore provided.

Further security. The judge may, upon his own motion or upon the

application of any party in interest, and on such notice as he may

direct to be given to the assignor, assignee and surety, require further

security to be given whenever, in his judgment, the security afforded by

the bond on file is not adequate.

Discharge or removal of assignee; correction of inventory or

schedule; supplemental inventories or schedules. The judge shall, in the

case provided in section four, and may also, at any time, on the

petition of one or more creditors, showing misconduct or incompetency of

the assignee, or on petition of the assignee himself, showing sufficient

reason therefor, and after due notice of not less than five days to the

assignor, assignee, surety and such other person as the judge may

prescribe, remove or discharge the assignee, and appoint one or more in

his place, and order an accounting of the assignee so removed or

discharged, and may enjoin such assignee from interfering with the

assignor's estate, and make provision by order for the safe custody of

the same, and enforce obedience to such injunction and orders by

attachment; and, upon the discharge of the assignee upon his own

application, such assignee's bond shall be canceled and discharged. The

new assignee shall give a bond, to be approved as required by section

six. The judge shall have power, by order, to require or allow any

inventory or schedule filed to be corrected or amended. The judge may

also require and compel, from time to time, supplemental inventories or

schedules to be made and filed within such time as he shall prescribe,

and to enforce obedience to all orders by attachment.

Failure to file bond. A failure to file any bond required by or

under this article, within the specified time will not deprive the judge

of his power over the assignee or the trust estate.

Action on bond; application of recovery. Any action brought upon

an assignee's bond may be prosecuted by a party in interest by leave of

the court; and all moneys realized thereon shall be applied by direction

of the judge in satisfaction of the debts of the assignor in the same

manner as the same ought to have been applied by such assignee.

Proceedings in case of death of assignee. In case an assignee

shall die during the pendency of any proceeding under this article, or

at any time subsequent to the filing of any bond required herein, his

personal representative or successor in office, or both, may be brought

in and substituted in such proceeding on such notice, of not less than

eight days, as the judge may direct to be given; and any decree made

thereafter shall bind the parties thus substituted as well as the

property of such deceased assignee, provided, however, that if such

assignee dies subsequent to the filing of his bond and before any

proceedings may have been had thereunder, then the surety on such bond

may apply to the judge for an accounting, who may, on such terms as to

him seem just and proper, appoint another assignee and release such

surety.

Notices to parties interested in the estate as creditors or

otherwise. Parties interested in the estate as creditors, or parties

otherwise interested, if the judge so directs, shall have at least ten

days' notice by mail to their respective addresses as they appear in the

schedule filed by the assignor, or at such other addresses as they shall

have filed with the assignee, of (a) all proposed sales of property, (b)

the declaration and time of payment of dividends, (c) the filing of the

interim account and the filing of the final account of the assignee and

of the hearing thereon, (d) the proposed compromise of any controversy.

Such notice may be published as the judge shall direct and must be

returnable in court.

The judge may cause such notices to be sent or published on the

petition of the assignee at any time after the assignment, or on

petition of any other person interested in the estate, at any time after

the lapse of sixty days from the filing of such assignment, or where an

assignee has been removed and ordered to account as hereinbefore

provided on the petition of a creditor, or an assignee's surety, or

assignor, and on good cause being shown, the judge may grant an order

directing the assignee to show cause at the time specified why a sale of

the property should not be had or a dividend should not be paid, or a

settlement of his account should not be had, or such other matters as in

the opinion of the judge should be disposed of.

Upon the hearing and determination of such order to show cause the

judge may make such order in the premises as justice requires.

Whenever the assignee has filed his final account the judge shall fix

a date for the final hearing to consider the judicial settlement of the

account, which date shall not be less than fifteen days following the

filing of the account and notices shall be given to the creditors as

provided in this section.

Debts which may be proved against the estate. Debts of the

assignor may be proved and allowed against his estate which are (a) a

fixed liability, as evidenced by a judgment absolutely owing at the time

of the assignment, or (b) a claim for taxable costs incurred before the

assignment, in good faith, in an action to recover a provable debt; (c)

or founded upon an open account, or upon a contract, express or implied

whether due or not due; or (d) claims for anticipatory breach of

contracts, executory in whole or in part, including unexpired leases of

real or personal property; provided, however, that the claim of a

landlord for damages for injury resulting from the rejection of an

unexpired lease of real estate or for damages or indemnity under a

covenant contained in such lease shall in no event be allowed in an

amount exceeding the rent reserved by the lease without acceleration,

for the year next succeeding the date of the surrender of the premises

to the landlord or the date of reentry of the landlord, whichever first

occurs, whether before or after the assignment, plus an amount equal to

the unpaid rent accrued, without acceleration up to such date.

In allowing the claims against the estate, in all cases of mutual

debts or credits between the estate of the assignor and a creditor the

amount shall be stated and one debt shall be set off against the other,

and the balance only shall be allowed.

A set-off or counterclaim shall not be allowed in favor of any debtor

of the assignor which (a) is not provable against the estate; or (b) was

purchased by or transferred to him after the filing of the general

assignment or with intent to such use and with knowledge or notice, or

if he had reasonable cause to believe, that such assignor was insolvent.

A person shall be deemed insolvent whenever the aggregate of his

property, exclusive of any property which he may have conveyed,

transferred, concealed, removed, or permitted to be concealed or

removed, with intent to defraud, hinder or delay his creditors, shall

not, at a fair valuation, be sufficient in amount to pay his debts.

Duties of assignee. It shall be the duty of the assignee to

collect and reduce to money the property of the estate, under the

direction of the court; report promptly to the court any claims

presented to him which are not provable, or are incorrect or false and

shall also report promptly for allowance all claims presented to him

which are not disputed; close up the estate as expeditiously as

possible; furnish such information concerning the estate as may be

requested by parties in interest; keep regular accounts; pay dividends

as often as is compatible with the best interests of the estate; make

appraisals or in his discretion employ an appraiser or appraisers;

designate and employ auctioneers; file an interim report within six

months of assuming his duites unless excused by the court or unless the

estate has been sooner distributed; file a final report and account at

least fifteen days before the final hearing to consider the judicial

settlement of the account.

Power of court. The court shall have power:

1. To allow claims, disallow claims, reconsider allowed or disallowed

claims, and allow or disallow them against the estate.

2. To authorize the business of assignor to be conducted for limited

periods by assignee, if necessary in the best interests of the estate,

and allow additional compensation for such services.

3. To bring in and substitute additional persons or parties in the

proceeding when necessary for the complete determination of a matter in

controversy, by issuing a citation directed to such persons or parties

and to be served as ordered by the court.

4. To reopen estates whenever it appears they were closed before being

fully administered.

5. To determine all claims of assignors to their exemptions.

6. To authorize an assignee to bring an action or special proceeding,

which he is hereby empowered to maintain, against any person who has

received, taken or in any manner interfered with the estate, property or

effects of the debtor in fraud of his creditors and which might have

been avoided by a creditor of the assignor and the assignee may recover

the property so transferred or its value.

6-a. To authorize an assignee to bring an action, which he is hereby

empowered to maintain, against any person, who with reasonable cause to

believe the assignor was insolvent as defined in section thirteen of

this act, has within four months of the assignment received a voluntary

transfer from the assignor of money or property for or on account of an

antecedent debt, the effect of which transfer is to enable the creditor

to obtain a greater percentage of his debt than some other creditor of

the same class, and the assignee may recover the property so transferred

or its value. For the purpose of this section a transfer shall be deemed

to have been made when it is so far perfected that no creditor having a

judgment on a simple contract without special priority (whether or not

such a creditor exists) could have obtained an interest superior to that

of the transferee therein. A transfer not so perfected prior to the

assignment shall be deemed to have been made immediately before the

assignment.

7. To direct upon the final settlement of the estate that the assignee

pay to the lawful creditors their proportionate dividend notwithstanding

their claim has not been presented in accordance with the notice sent

out by the assignee. If a final dividend is ordered and paid not less

than six months after notice to creditors to present their claims, the

assignee shall have no liability to creditors whose claims have not been

presented prior to entry of the order directing payment of the final

dividend and which were unknown to him at that time. The court shall

have no power to allow claims not presented within one year from the

date of the recording of the assignment.

8. To allow secured creditors such sum only as to the court seems to

be owing over and above the value of their securities.

9. To examine the parties and witnesses on oath in relation to the

assignment and accounting and all matters connected therewith and to

compel their attendance for that purpose and their answers to questions,

and the production of books and papers;

10. To require the assignee to render and file an interim account of

his proceedings within six months of assuming his duties unless the

estate is sooner distributed and to require the assignee to render and

file a final account of his proceedings, and to enforce the same in the

manner provided by law for compelling an executor or administrator to

comply with a surrogate's order for an account;

11. To take and state an interim and a final account as submitted by

the assignee, or, as to the final account, to appoint a referee to take

and state it if demanded, within ten days after the date has been fixed

for the final hearing to consider the judicial settlement of the

account, by a creditor or creditors whose claim or claims represent

one-fourth or more in amount of all claims scheduled or filed. The

referee shall be an official referee if such a referee is available and

shall have the powers enumerated in subdivision nine of this section;

12. To settle and adjudicate upon the account and the claims

presented, and to decree payment of any creditor's just proportional

part of the fund, or, in case of a partial accounting, so much thereof

as the circumstances of the case render just and proper;

13. To discharge the assignee and his surety at any time, upon

performance of the decree, from all further liability upon matters

included in the accounting, to creditors appearing and to creditors not

having appeared after due citation, or not having presented their claims

after due advertisement;

14. On proof of a composition between the assignor and his creditors,

to discharge the assignee and his sureties from all further liability to

the compounding creditors appearing or duly cited, and to authorize the

assignee to release the assets to the assignor; provided, however, that

if there be any creditors not assenting to the composition, the court

shall determine what proportion of the fund shall be paid to or reserved

for creditors not assenting, which shall not be less than the sum or

share to which they would be entitled if no composition had been made,

and may decree distribution accordingly;

15. To adjourn the proceedings from time to time, grant further orders

if necessary, and amend the petition and proceedings thereon before

decree in furtherance of justice;

16. To punish as for a contempt any disobedience or violation of any

order made or process issued in pursuance of this article, and to

restrain by arrest and imprisonment any party or witness when it shall

satisfactorily appear that such party or witness is about to leave the

jurisdiction of the court, and to take bail to secure the attendance of

such party or witness, to be prosecuted under the order of the court in

case of forfeiture by and for the benefit of the party in whose interest

such examination shall be ordered;

17. To exercise such other or further powers in respect to the

proceedings and the accounting therein as a surrogate may by law

exercise in reference to an accounting by an executor or administrator.

Examination of witnesses. 1. The judge may also, at any time, on

petition of the assignee or any party interested, order the examination

of witnesses and the production of any books and papers by any party or

witness before him or before a referee appointed by him for such

purpose, or before the assignee who shall have power to administer

oaths, compel the attendance of witnesses, and production of books,

records and papers by the issuance of subpoena, and the evidence so

taken, together with books and papers, or extracts therefrom, as the

case may be, shall be filed in the county clerk's office, and may be

used in evidence by any creditor or assignee in any action or proceeding

then pending, or which may hereafter be instituted.

2. In any examination ordered pursuant to subdivision one of this

section, the court may confer immunity in accordance with the provisions

of section 50.20 of the criminal procedure law; provided, however, that

no immunity shall be conferred except upon twenty-four hours prior

written notice to the appropriate district attorney having an official

interest therein.

Invalid claims. Claims which for want of record or for other

reasons would not have been valid as against the claims of creditors of

the assignor shall not be liens against his estate.

Effect of orders; power of judge and duties of clerk. All orders

or decrees in proceedings under this article shall have the same force

and effect, and may be entered, docketed and enforced and appealed from

the same as if made in an original action brought in the court in which

the proceeding is pending; provided, however, that a final decree,

directing the payment of money, may be enforced by serving a certified

copy thereof personally upon the assignee for the benefit of creditors,

and if said assignee wilfully neglects to obey said decree, by punishing

him for a contempt of court. The imprisonment of said assignee, by

virtue of proceedings to punish him for contempt, as prescribed in this

section, or a levy upon his property by virtue of an action, shall not

bar, suspend or otherwise affect an action against the sureties on his

final bond. All proceedings under this article shall be deemed to be had

in court. The said court shall always be open for proceedings under this

article. The judge, when named in this article, shall, in such

proceedings, be deemed to be acting as the court. The clerk of the court

shall keep a separate book, in which shall be entered, in each case, the

date and place of record of the assignment, and a minute of all

proceedings therein, under this article, with such particularity as the

court shall direct by general order. He shall record therein the orders

and decrees of the court, settling, rejecting or adjusting claims, and

directing the payment of money, or releasing assets by the assignee, and

removing or discharging the assignee and his sureties, and such other

orders as the courts shall direct by general order. The said clerk shall

securely keep the papers in each case in a file by themselves, and shall

be entitled to a fee, except as otherwise provided by law, of one dollar

for filing all the papers in each case, and entering the proceedings in

the minute-book, and fifty cents to be paid by the assignee, unless

otherwise directed, for recording each order or decree required by this

article or the general order of the court. The clerk shall not record at

length any order except the final order in a proceeding under this

article, unless directed to do so by the court.

Sale and compromise of claims and property. The judge may, upon

the application of the assignee and for good and sufficient cause shown,

and upon such terms as he may direct, authorize the assignee to sell,

compromise or compound any claim or debt belonging to the estate of the

debtor. But such authority shall not prevent any party interested in the

trust estate from showing upon the final accounting of such assignee

that such debt or claim was fraudulently or negligently sold, compounded

or compromised. The sale of any debt or claim heretofore made in good

faith by any assignee shall be valid, subject, however, to the approval

of the judge, and the assignee shall be charged with and be liable for,

as part of the trust fund, any sum which might or ought to have been

collected by him.

All sales shall be had at public auction unless otherwise ordered by

the judge. Upon application to the judge, and for good cause shown, the

assignee may be authorized to sell any portion of the estate at private

sale; in which case he shall keep an accurate record of each article

sold, and the price received therefor, and to whom sold; which account

he shall file at once. Upon application by the assignee or a creditor

setting forth that a part or the whole of the estate is perishable, the

nature and location of such perishable property, and that there will be

loss if the same is not sold immediately, the judge, if satisfied of the

facts stated and that the sale is required in the interest of the

estate, may order the same to be sold with or without notice to

creditors.

General powers of court. Any proceeding under this article shall

be deemed for all purposes, including review by appeal or otherwise, to

be a proceeding had in the court as a court of general jurisdiction, and

the court shall have full jurisdiction to do all and every act relating

to the assigned estate, the assignees, assignors and creditors, and

jurisdiction shall be presumed in support of the orders and decrees

therein unless the contrary be shown; and after the filing or recording

of an assignment under this article, the court may exercise the powers

of a court of equity in reference to the trust and any matters involved

therein.

Trial, costs and commissions. The court, in its discretion, may

order a trial by jury or before a referee, of any disputed claim or

matter arising under the provisions of this article. It may in its

discretion award reasonable counsel fees and costs, determine which

party shall pay the same, and make all necessary rules to govern the

practice under this article. The assignee or assignees named in any

assignment shall receive for his or their services a commission of not

to exceed five per centum on the whole sum which will have come into his

or their hands, except in a case where such percentage shall not equal

two hundred dollars in which case the court may grant such a sum which

with such percentage shall equal two hundred dollars. If the assignee

continues the business the court may allow him additional compensation

equal to what he might be allowed as hereinabove provided.

The actual and necessary expenses incurred by the assignee in the

administration of the estate shall be reported in detail, under oath,

and examined and approved or disapproved by the court. If approved they

shall be paid out of the estate.

Company pension plans; deductions from wages trust moneys;

preference. Moneys contributed from wages or salary by an employee or

former employee under any retirement system or plan maintained or

operated by a domestic corporation, association, co-partnership or

joint-stock company, together with all accumulations of interest, shall

belong to the employee making the contributions and be deemed to be held

in trust by the employer for the benefit of the employee. In all

distribution of assets of such an employer or former employer, whether

insolvent or otherwise, the amount so contributed, together with such

accumulations of interest, shall first be paid to the employee or former

employee, his executors, administrators or assigns, before payment of

unsecured creditors.

Wages and commissions and preferred claims. 1. In all

distribution of assets under all assignments made in pursuance of this

article, the wages or salaries actually owing to the employees of the

assignor or assignors at the time of the execution of the assignment for

services rendered within three months prior to the execution of the

assignment, not exceeding one thousand dollars to each employee, and

after payment of the foregoing, all claims for cash deposits not

exceeding three hundred dollars made and left with an assignor or

assignors on account of purchases at retail of merchandise or services,

where such deposits were made within six months before the execution of

the assignment and such merchandise has not been delivered or the

services performed, shall be preferred before any other debt except

wages or salaries as aforesaid; and should the assets of the assignor or

assignors not be sufficient to pay in full all the claims preferred,

pursuant to this section, they shall be applied to the payment first of

wages or salaries to the full amount of each such wage or salary, and

thereafter pro rata to payment of such cash deposits.

2. For the purposes of this section, wages or salaries shall mean; (a)

all compensation and benefits payable by an employer to or for the

account of the employee for personal services rendered by such employee.

These shall specifically include but not be limited to salaries,

overtime, vacation, holiday and severance pay; employer contributions to

or payments of insurance or welfare benefits; employer contributions to

pension or annuity funds; and any other moneys properly due or payable

for services rendered by such employee. Vacation and severance pay due

and owing at the time of the filing of an assignment, or which became

due and owing after the filing of an assignment, but prior to the

closing of the estate, shall be considered as wages or salaries owed for

services rendered within three months prior to the execution of the

assignment, or (b) commissions due traveling or city salesmen on

salaries or commission basis, whole or part-time, whether or not selling

exclusively for the assignor or assignors, and for the purpose of this

section, traveling or city salesmen, shall include all such salesmen

whether or not they are independent contractors selling products or

services of the bankrupt with or without a drawing account or formal

contract.

Limitation of preferences. In all general assignments of the

estates of debtors for the benefit of creditors no preference created

therein, other than for the wages or salaries of or moneys held in trust

for employees under section twenty-one-a and section twenty-two or cash

deposits upon purchases for future delivery of merchandise or services

under section twenty-two, shall be valid.

Appraisal of estate in the hands of assignee. Whenever it shall

become necessary to appraise in whole or in part any estate in the hands

of any assignee for the benefit of creditors, the persons whose duty it

shall be to make such appraisal shall value the real estate at its full

and true value, taking into consideration actual sales of neighboring

real estate similarly situated during the year immediately preceding the

date of such appraisal, if any; and they shall value all such property,

stocks, bonds or securities as are customarily bought or sold in open

markets in the city of New York or elsewhere, for the day on which such

appraisal or report may be required, by ascertaining the range of the

market and the average of prices as thus found, running through a

reasonable period of time.

Definitions. As used in this article, unless the context or

subject matter requires otherwise:

(a) "Liquidation proceeding" includes all assignments for the benefit

of creditors, whether voluntary or by operation of law; equity

receiverships where the subject under receivership is insolvent; and any

other proceedings for distribution of assets of any insolvent debtor,

whether a person, partnership, corporation or business association

except proceedings under article seventy-four of the insurance law and

article thirteen of the banking law.

(b) "Liquidator" means any person administering assets in any

liquidation proceedings.

(c) "Insolvent debtor" means any insolvent person, partnership,

corporation or business association involved in a liquidation

proceeding.

(d) "Secured creditor" means a creditor who has either legal or

equitable security for his debt upon any property of the insolvent

debtor of a nature to be liquidated and distributed in a liquidation

proceeding, or a creditor to whom is owed a debt for which such security

is possessed by some endorser, surety, or other person secondarily

liable.

(e) "Creditor's sale" includes any sale effected by the secured

creditor by judicial process or otherwise under the terms of his

contract or the applicable law for the purpose of realizing upon his

security.

Secured creditor's claim to disclose security. In a liquidation

proceeding every secured creditor's claim against the general assets

shall disclose the nature of the security. When in an equity

receivership it is determined that the subject under receivership is

insolvent, secured creditors having claims on file which do not comply

with this section shall make disclosure within a time to be fixed by the

court.

Effect of concealment. Any secured creditor who with intent to

evade the provisions of this article fails to disclose the existence of

the security shall not be entitled to receive or retain dividends out of

the general assets, unless he thereafter releases or surrenders to the

liquidator the security which he has failed to disclose, or unless he

procures such release or surrender if the security is in the possession

of an indorser, surety, or other person secondarily liable for the

insolvent debtor.

Value of security credited upon claims. Dividends paid to

secured creditors shall be computed only upon the balance due after the

value of all security not exempt from the claims of unsecured creditors

and not released or surrendered to the liquidator, is determined and

credited upon the claim secured by it.

Determination of value by secured creditor. The value of assets

constituting the security may be determined by one of the following

methods by the secured creditor:

(1) By collection. When the asset constituting the security is an

obligation for the payment of money, the secured creditor may determine

its value by collection or by exhausting his remedies thereon and then

surrendering the obligation to the liquidator.

(2) By creditor's sale. When the asset constituting the security is

something other than an obligation for the payment of money, the secured

creditor may determine its value by creditor's sale.

Alternative determinations of value. Where valuation under the

provisions of section thirty-four is impracticable or would cause undue

delay, the court, upon petition by either the secured creditor or the

liquidator, may order the value of the security determined by any of the

following methods:

(1) By compromise, if the secured creditor and the liquidator agree

upon a value. The liquidator may redeem such assets by payment of the

agreed value, if authorized by the court.

(2) By litigation, through proceedings in the liquidation proceeding.

The liquidator may redeem such assets by paying the value so determined,

if authorized by the court.

(3) By liquidator's sale of the assets which, when completed and

approved by the court, shall pass to the purchaser good title, free and

clear of all liens of the secured creditor, such liens to be transferred

to the proceeds of the sale. The order of the sale may be either

(a) Conditional, requiring the sale to be made by the liquidator only

if the secured creditor does not complete a determination by collection

or creditor's sale as set forth in section thirty-four of this article

within a time fixed by the court; or

(b) Absolute, requiring the sale to be made by the liquidator within

the time fixed by the court.

Exempt security not credited. When any creditor has legal or

equitable security upon assets which are exempt from process for the

satisfaction of unsecured debts and are duly claimed as exempt by the

insolvent debtor, the value of such security shall not be credited upon

the claim. Amounts realized by the creditor from such security after

liquidation proceedings are begun shall be disregarded in computing

dividends, unless the dividend so computed exceeds the sum actually

owing upon the claim, in which event only the amount owing shall be

paid.

Constitutionality. If any provision of this article or the

application thereof to any person or circumstances is held invalid, the

invalidity shall not affect other provisions or applications thereof

which can be given effect without the invalid provision or application,

and to this end the provisions of this article are declared to be

severable.

Uniformity of interpretation. This article shall be so

interpreted and construed as to effectuate its general purpose to make

uniform the law of those states which enact it.

Who may be discharged. An insolvent debtor, who is a resident of

the state at the time of presenting his petition, may be discharged from

his debts, as prescribed in this article.

To what court application to be made. Application for such a

discharge must be made, by the petition of the insolvent, addressed to

the county court of the county in which he resides; or, if he resides in

the city of New York, to the supreme court.

Contents of petition. The petition must be in writing; it must

be signed by the insolvent, and specify his residence; it must set

forth, in substance, that he is unable to pay all his debts in full;

that he is willing to assign his property for the benefit of all his

creditors, and, in all other respects, to comply with the provisions of

this article, for the purpose of being discharged from his debts; and it

must pray that, upon his so doing, he may be discharged accordingly. It

must be verified by the affidavit of the insolvent, annexed thereto,

taken on the day of the presentation thereof, to the effect, that the

petition is in all respects true, in matter of fact.

Consent of creditors to be annexed. The petitioner must annex to

his petition one or more written instruments, executed by one or more of

his creditors, residing in the United States, having debts owing to him

or them in good faith, then due or thereafter to become due, which

amount to not less than two-thirds of all the debts, owing by the

petitioner to creditors residing within the United States. Each

instrument must be to the effect, that the person or corporation,

executing it, consents to the discharge of the petitioner from his

debts, upon his complying with the provisions of this article.

Consent of executor, administrator, receiver, or trustee. An

executor or administrator may become a consenting creditor, under the

order of the surrogate's court from which his letters issued. A trustee,

official assignee, or receiver of the property of a creditor of the

petitioner, whether created by operation of law or by the act of

parties, may become a consenting creditor, under the order of a justice

of the supreme court. A person who becomes a consenting creditor, as

prescribed in this section, is chargeable only for the sum which he

actually receives, as a dividend of the insolvent's property.

Consent of corporation or joint-stock association. Where a

corporation or joint-stock association becomes a consenting creditor,

its consent must be executed under its common seal, and may be attested

by any director or other officer thereof, duly authorized for that

purpose; who may make any affidavit, required of a creditor in the

proceedings.

Consent of partnership. Where a partnership becomes a consenting

creditor, the consent may be executed in its behalf, and any affidavit,

required of a creditor in the proceedings, may be made, by either of the

partners.

Effect of consent where petitioner is a joint debtor. A

creditor's consent does not affect his remedy against any person or

persons indebted jointly with the petitioner; and the petitioner's

discharge has the effect, as between the creditor and the other joint

debtors, of a composition between the petitioner and the creditor, made

as prescribed in title one of article fifteen of the general obligations

law.

Consent of purchaser or assignee of debt. Where a consenting

creditor is the purchaser or assignee of a debt against the petitioner,

or the executor, administrator, trustee, or receiver of such a purchaser

or assignee, he is deemed, for all the purposes of this article, except

as to the declaration and receipt of dividends, a creditor only to the

amount, actually and in good faith paid for the debt, by him, or by the

decedent or other person, from whom he derives title, and remaining

uncollected. This section is not affected by the recovery of a judgment

for the debt, after the purchase or assignment; but in that case, the

consenting creditor may include the uncollected costs, as if they were

part of the sum paid for the debt.

Consenting creditor must relinquish security. A creditor who

has, in his own name, or in trust for him, a mortgage, judgment, or

other security, for the payment of a sum of money, which is a lien upon,

or otherwise affects, real or personal property belonging to the

petitioner, or transferred by him since the lien was created, cannot

become a consenting creditor, with respect to the debt so secured,

unless he adds to or includes in his consent, a written declaration,

under his hand, to the effect, that he relinquishes the mortgage,

judgment, or other security, so far as it affects that property, to the

trustee to be appointed pursuant to the petition, for the benefit of all

the creditors. Such a declaration operates, to that extent, as an

assignment to the trustee, of the mortgage, judgment, or other security;

and vests in him accordingly all the right and interest of the

consenting creditor therein.

Penalty if creditor swears falsely. If a creditor knowingly

swears, in any proceedings authorized by this article, that the

petitioner is, or will become, indebted to him, in a sum of money, which

is not really due, or thereafter to become due; or in more than the true

amount; or that more was paid for a debt, which was purchased or

assigned, than the sum, actually and in good faith paid therefor; he

forfeits to the trustee, to be recovered in an action, twice the sum, so

falsely sworn to.

Affidavit of consenting creditor. The consent of a creditor must

be accompanied with his affidavit, stating as follows:

1. That the petitioner is justly indebted to him, or will become

indebted to him, at a future day specified therein, in a sum therein

specified; and, if he, or the person from whom he derives title, is or

was the purchaser or assignee of the debt, he must also specify the sum,

actually and in good faith paid for the debt, as prescribed in section

fifty-eight of this chapter.

2. The nature of the demand, and whether it arose upon written

security, or otherwise, with the general ground or consideration of the

indebtedness.

3. That neither he, nor any person to his use, has received from the

petitioner, or from any other person, payment of a demand, or any part

thereof, in money or in any other way, or any gift or reward of any

kind, upon an express or implied trust, confidence, or understanding,

that he should consent to the discharge of the petitioner.

Where a consenting creditor is an executor, administrator, trustee,

receiver, or assignee, he may state the necessary facts, in his

affidavit, upon information and belief, setting forth therein the

grounds of his belief; but in that case, the consent must also be

accompanied with the affidavit of the insolvent, to the effect, that all

the matters of fact stated in the affidavit of the consenting creditor,

are true.

When non-resident creditor to annex accounts and securities. A

consenting creditor, residing without the state, and within the United

States, must annex to his consent the original accounts, or sworn copies

thereof, and the original specialties or other written securities, if

any, upon which his demand arose or depends. Provided, however, that

when such original specialties, or other written securities, are lost,

such fact must be stated as a reason for not annexing thereto the

consent, and the fact of the loss, and the manner of the loss thereof

must be stated in the affidavit of the creditor to the best of his

knowledge, or must be otherwise proved by affidavit to the satisfaction

of the court; and the court may thereupon, in such case or proceeding,

by its order, dispense with the annexing to such consent of the original

specialties or other written securities.

Petitioner's schedule. The petitioner must annex to his petition

a schedule, containing:

1. A full and true account of all his creditors.

2. A statement of the place of residence of each creditor, if it is

known; or, if it is not known, a statement of that fact.

3. A statement of the sum which he owes to each creditor, and the

nature of each debt or demand, whether arising on written security, on

account, or otherwise.

4. A statement of the true cause and consideration of his indebtedness

to each creditor, and the place where the indebtedness accrued.

5. A statement of any existing judgment, mortgage, or collateral or

other security, for the payment of the debt.

6. A full and true inventory of all his property, in law or in equity,

of the incumbrances existing thereon, and of all the books, vouchers,

and securities, relating thereto.

Petitioner's affidavit. An affidavit, in the following form,

subscribed and taken by the petitioner before the county judge, or, in

the city of New York, before the judge holding the term of the court, at

which the order specified in the next section is made, must be annexed

to the schedule:

"I, __________ , do swear" (or "affirm," as the case may be), "that

the matters of fact stated in the schedule hereto annexed, are, in all

respects, just and true; that I have not, in contemplation of my

becoming insolvent, or within two years before presenting the petition

herein, disposed of or made over any part of my property, not exempt by

express provision of law from levy and sale by virtue of an execution,

for the future benefit of myself or my family, or disposed of or made

over any part of my property, in order to defraud any of my creditors;

that I have not, in any instance, created or acknowledged a debt for a

greater sum than I honestly and truly owed; and that I have not paid,

secured to be paid, or in any way compounded with, any of my creditors,

with a view fraudulently to obtain the prayer of my petition; that I

have not done, suffered or been privy to any act, matter or thing which,

if accomplished, would be ground for withholding my discharge under the

provisions of this act, or invalidate such discharge if granted."

Order to show cause. The petition and other papers, specified in

the foregoing sections of this article, must be presented to the court,

and filed with the clerk. The court must thereupon make an order,

requiring all the creditors of the petitioner to show cause before it,

at a time and place therein specified, why an assignment of the

insolvent's property should not be made, and he be thereupon discharged

from his debt, as prescribed in this article; and directing that the

order be published and served, as prescribed in the next section.

How order published and served. The order must be published and

served in the following manner:

1. The petitioner must cause a copy thereof to be published in a

newspaper, designated in the order, published in the county; and also,

if one-fourth part of the insolvent's debts accrued or are due to

creditors residing in the city of New York, in a newspaper published in

that city, designated in the order. The publication must be made at

least once in each of four weeks, immediately preceding the day in which

cause is to be shown.

2. The petitioner must also serve upon each creditor, residing within

the United States, whose place of residence is known to him, a copy of

the order to show cause, either personally, at least twenty days before

the day when cause is to be shown, or by depositing it, at least forty

days before that day, in the post-office, inclosed in a post-paid

wrapper, addressed to the creditor at his usual place of residence.

Where the state is a creditor of the petitioner, a copy of the order

must be served upon the attorney-general, who must represent the state

in the subsequent proceedings.

Hearing. On the day specified in the order, and before any other

proceedings are taken in the matter, the petitioner must present to the

court, and file with the clerk, proof, to the satisfaction of the court,

that the order has been published and served, as prescribed in the last

section; and thereupon, on the same day, or upon the day to which the

hearing is adjourned, the court must hear the allegations and proofs of

the parties appearing. Proof of personal service of a copy of the order

upon any person, must be made, in like manner as proof of the personal

service of a summons, in an action brought in the supreme court.

Putting cause on calendar. Where the insolvent's discharge is

opposed, the court may direct the special proceeding to be placed upon

the calendar for trial. In that case, the parties must appear, and the

proceedings are the same, as in an action, except as otherwise

prescribed in this article; and costs, as in an action, except for

proceedings before notice of trial, may be awarded to either party, in

the discretion of the court.

Opposing creditor to file specifications, and may demand jury

trial. In order to entitle a creditor to oppose the discharge of the

insolvent, he must, on the day fixed to show cause, or at such other

time as the court may direct, file with the clerk a specification of his

objections; and he may then, but not afterwards, demand a trial, by a

jury, of the questions of fact arising thereupon. If a trial by a jury

is not then demanded, the questions of fact must be tried by the court,

without a jury. Where one of two or more opposing creditors demands a

trial by a jury, all the material questions of fact, arising upon the

objections of all the creditors, must be tried in like manner, and at

the same time.

Opposing creditor to file proofs, if not named in schedule.

Where the name of an opposing creditor does not appear in the schedule,

he must file, with the specification of his objections, proof, by

affidavit, that he is a creditor; and, if his debt is not set forth in

the schedule, he must also file his affidavit, to the effect specified

in subdivisions first and second of section sixty-one of this chapter.

Proceedings if jurors do not agree. There shall be but one trial

by jury. If the jurors cannot agree, after being kept together for such

a time as the court deems reasonable, the court must discharge them, and

determine the questions of fact, or those questions as to which the

jurors have not agreed, upon the evidence taken before the jury, as if a

jury had not been demanded.

When insolvent required to produce his non-resident wife. Where

the petitioner's wife resides without the state, the court, or a judge

thereof out of court, may, upon the application of any creditor, make an

order, requiring the petitioner to bring his wife before the court, at

the hearing or trial, to the end that she may be examined as a witness.

A copy of the order must be personally served upon the petitioner, at

least three weeks before the hearing. If it appears, upon the hearing,

that service could not, with due diligence, be so made, in consequence

of the petitioner's sickness or absence, the court may, in its

discretion, adjourn the hearing or trial, and prescribe the time and

manner of service of the order for the adjourned day. If, after due

service, the petitioner's wife does not attend at the time and place

appointed, the petitioner is not entitled to his discharge, unless he

proves, to the satisfaction of the court, by his affidavit, or upon his

oral examination, or otherwise, that he was unable to procure her

attendance.

Examination of insolvent. At the hearing or trial, the

petitioner must be examined under oath, at the instance of any creditor,

touching his property or debts, or any other matter stated in his

schedule, or any changes that have occurred in the situation of his

property, since the making of the schedule; and particularly whether he

has collected any debts or demands, or made any transfers of, or

otherwise affected, his real or personal property. Any creditor may

contradict or impeach, by other competent evidence, the testimony of the

insolvent or of his wife.

When insolvent cannot be discharged. In either of the following

cases, the petitioner is not entitled to a discharge:

1. Where it appears, upon the hearing or trial, that, after making the

schedule annexed to his petition, he has collected a debt or demand, or

transferred, absolutely, conditionally, or otherwise, any of his

property, not exempt by law from levy and sale by virtue of an

execution, and he neglects or refuses forthwith to pay over to the

clerk, the full amount of all debts and demands so collected, and the

full value of all property so transferred, except so much of the money,

and of the value of the property, as appears to have been necessarily

expended by him for the support of himself or his family.

2. Where it appears, in like manner, that the petitioner, within two

years before presenting the petition, has, in contemplation of his

becoming insolvent, or of his petitioning for his discharge, or knowing

of his insolvency, made an assignment, sale, or transfer, either

absolute or conditional, of any of his property, or of any interest

therein, or confessed a judgment, or given any security, with a view of

giving a preference to a creditor for an antecedent debt.

When assignment to be directed. An order, directing the

execution of an assignment, must be made by the court, where it appears,

by the verdict of the jury; or, if a jury has not been demanded, or the

jurors have been discharged by reason of their inability to agree, where

it satisfactorily appears to the court; as follows:

1. That the petitioner is justly and truly indebted to the consenting

creditors, in sums which amount, in the aggregate, to two-thirds of all

the debts, which the petitioner owed, at the time of presenting his

petition, to creditors residing within the United States.

2. That he has honestly and fairly given a true account of his

property.

3. That he has, in all things, conformed to the matters required of

him by this article.

Assignment; contents, and to whom made. The order must designate

one or more trustees, residents of the state; and must direct the

petitioner to execute, to him or them, an assignment of all his

property, at law or in equity, in possession, reversion, or remainder,

excepting only so much thereof, as is exempt by law from levy and sale,

by virtue of an execution. The assignment must be acknowledged or

proved, and certified, in like manner as a deed to be recorded in the

county, and must be recorded in the clerk's office of the county. Where

it appears, from the schedule or otherwise, that real property will pass

thereby, it must be also recorded as a deed, in the proper office for

recording deeds, of each county where the real property is situated.

Trustees, how designated. The trustee or trustees may be

nominated by a majority in amount of the consenting creditors. If no

person is so nominated, one or more persons must be appointed by the

court for the purpose. The nomination may be included in the consent, or

made in a separate paper, or orally upon the hearing or trial, and

entered in the minutes.

Effect of assignment. The assignment vests in the trustee or

trustees all the petitioner's interest, legal or equitable, at the time

of its execution, in any real or personal property, not exempt by law

from levy and sale by virtue of an execution; and any contingent

interest which may vest within three years thereafter. When a contingent

interest so vests, it passes to the trustee, in the same manner as it

would have vested in the petitioner, if he had not made an assignment.

When discharge to be granted. Upon the production by the

petitioner of a certificate of the trustee or trustees, duly

acknowledged or proved, and certified, in like manner as a deed to be

recorded in the county, to the effect, that the insolvent has assigned,

for the benefit of all his creditors, all his property so directed to be

assigned, and all the books, vouchers, and papers relating thereto, and

that he has delivered so much thereof as is capable of delivery; and

also of a certificate of the county clerk, that the assignment has been

duly recorded in his office; the court must grant to the insolvent a

discharge from his debts, which has the effect declared in the following

sections of this article.

Order to show cause where trustee refuses to give certificate.

If a trustee refuses or neglects, upon payment or tender by the

petitioner of the expense of so doing, to execute or acknowledge a

certificate, as prescribed in the last section, or to cause the

assignment to be recorded, as therein prescribed, the court, upon proof

by affidavit of the facts, must make an order, requiring the trustee to

show cause, at a time and place therein specified, why the petitioner

should not be discharged, notwithstanding his neglect or refusal; and

why the trustee's appointment should not be revoked.

Proceedings upon return of order. If, upon the return of the

order, it appears that the assignment has been duly executed, and that

the petitioner has duly delivered all his property directed to be

assigned, and all the books, vouchers, and papers relating thereto,

which are capable of delivery, the court may, either

1. Grant a discharge of the petitioner, notwithstanding the neglect or

refusal of the trustee; or

2. Make an order, revoking the appointment of the trustee. Upon the

entry of such an order, the powers of the trustee, and his interest in

the assigned property, cease. If there is no other trustee, the court

must, by the same or another order, appoint one or more new trustees.

Such an appointment has the same effect, as if the person or persons so

appointed were named as trustees in the original assignment.

Discharge and other papers to be recorded. The discharge, and

the petition, affidavits, orders, schedule, and other papers, upon which

the discharge is granted, exclusive of the minutes of testimony, must be

recorded in the clerk's office of the county, within three months after

the discharge is granted. In default thereof, the discharge becomes

inoperative, from and after that time. The original discharge, the

record thereof, or a transcript of the record duly authenticated, is

conclusive evidence of the proceedings and facts therein contained. The

other papers specified in this section, the record thereof, or a

transcript of the record duly authenticated, are presumptive evidence of

the proceedings and facts therein contained.

Effect of discharge. Except as prescribed in the next two

sections, a discharge granted as prescribed in this article, exonerates

and discharges the petitioner from every debt, due at the time when he

executed his assignment, including a debt contracted before that time,

though payable afterwards; and from every liability incurred by him, by

making or indorsing a promissory note, or by accepting, drawing, or

indorsing a bill of exchange, before the execution of his assignment; or

incurred by him, in consequence of the payment, by any party to such a

note or bill, of the whole or any part of the money secured thereby,

whether the payment is made before or after the execution of the

assignment. At any time after one year has elapsed, since the recording

of the discharge, and the petition, affidavits, orders, schedule and

other papers upon which the discharge was granted, as prescribed in

section eighty-two of this chapter, the petitioner may apply, upon proof

of his discharge, to the court in which a judgment shall have been

rendered against him, for an order directing the judgment to be canceled

and discharged of record. If it appears that he has been discharged from

the payment of that judgment, an order must be made accordingly, and

thereupon the clerk must cancel and discharge the docket thereof, as if

the proper satisfaction-piece of the judgment was filed. Notice of the

application, accompanied with copies of the papers upon which it is

made, must be given to the judgment creditor, unless his written consent

to the granting of the order, with satisfactory proof of the execution

thereof, and if he is not the party in whose favor the judgment was

rendered, that he is the owner thereof, is presented to the court upon

the application.

Effect of discharge as to foreign contracts or creditors. In

either of the following cases, such a discharge does not affect a debt

or liability, founded upon a contract, unless it was owing, when the

petition was presented, to a resident of the state; or the creditor has

executed a consent to the discharge; or has appeared in the proceedings;

or has received a dividend from the trustee:

1. Where the contract was made with a person, not a resident of the

state.

2. Where it was made and to be performed without the state.

3. Where the creditor was not, at the time of the discharge, a

resident of the state.

Effect of discharge as to debts to the United States and the

state. Such a discharge does not affect:

1. A debt or duty to the United States; or

2. A debt or duty to the state, for taxes or for money received or

collected by any person as a public officer, or in a fiduciary capacity,

or a cause of action specified in section sixty-three-c of the executive

law or a judgment recovered upon such a cause of action.

Except as prescribed in this section, the discharge exonerates the

petitioner from a debt or other liability to the state, in like manner

and to the same extent, as from a debt or liability to an individual.

Insolvent to be released from imprisonment. If, at the time when

the discharge is granted, the petitioner is under arrest, by virtue of

an execution against his person issued, or an order of arrest made, in

an action or special proceeding, founded upon a debt or liability from

which he is discharged, as prescribed in the foregoing sections of this

article, he must be released from the arrest, upon producing to the

officer his discharge, or a certified copy of the record thereof. If the

adverse party wishes to test the validity of the discharge, he may

procure a new order of arrest, or cause a new execution to be issued, as

the case requires.

Discharge, when void. A discharge, granted as prescribed in this

article, is void, in either of the following cases:

1. Where the petitioner wilfully swears falsely, in the affidavit

annexed to his petition or schedule, or upon his examination, in

relation to any material fact, concerning his property or his debts, or

to any other material fact.

2. Where, after presenting his petition, he sells, or in any way

transfers or assigns, any of his property, or collects any debt or

demand owing to him, and does not give a just and true account thereof,

upon the hearing or trial, and does not pay the money so collected, or

the value of the property so sold, transferred, or assigned, as

prescribed in this article.

3. Where he secretes any part of his property, or a book, voucher, or

paper relating thereto, with intent to defraud his creditors.

4. Where he fraudulently conceals the name of any creditor, or the sum

owing to any creditor, or fraudulently misstates such a sum.

5. Where, in order to obtain his discharge, he procures any person to

become a consenting creditor, wilfully, intentionally, and knowingly,

for a sum not due from him to that person in good faith, or for a sum

greater than that for which the holder of a demand, purchased or

assigned, is deemed a creditor, as prescribed in this article.

6. Where he pays, or consents to the payment of, any portion of the

debt or demand of a creditor, or grants or consents to the granting of

any gift or reward to a creditor, upon an express or implied contract,

trust, or understanding, that the creditor so paid or rewarded should be

a consenting creditor, or should abstain or desist from opposing the

discharge.

7. Where he is guilty of any fraud whatsoever, contrary to the true

intent of this article.

Invalidity may be proved on motion to vacate order of arrest or

execution. Where a person, who has been discharged as prescribed in this

article, is afterwards arrested by virtue of an order of arrest made, or

an execution issued, in an action founded upon a debt or liability from

which he is so discharged, the adverse party may oppose his application

to be released from the arrest, by proof, by affidavit, of any cause for

avoiding the discharge, for want of jurisdiction, or as specified in the

last section. If such a cause is established, the application must be

denied.

Who may be exempted, and by what court. An insolvent debtor may

be exempted from arrest, or discharged from imprisonment, as prescribed

in this article. For that purpose, he must apply, by petition, to the

county court of the county in which he resides, or is imprisoned; or, if

he resides or is imprisoned in the city of New York, to the supreme

court. A person, who has been admitted to the jail liberties, is deemed

to be imprisoned, within the meaning of this article.

Contents of petition. The petition must be in writing; it must

be signed by the insolvent, and specify his residence, and also, if he

is in prison, the county in which he is imprisoned, and the cause of his

imprisonment. It must set forth, in substance, that he is unable to pay

all his debts in full; that he is willing to assign his property for the

benefit of all his creditors, and in all other respects to comply with

the provisions of this article, for the purpose of being exempted from

arrest and imprisonment, as prescribed therein; and it must pray, that

upon his so doing, he may thereafter be exempted from arrest, by reason

of a debt, arising upon a contract previously made; and also, if he is

imprisoned, that he may be discharged from his imprisonment. It must be

verified by the affidavit of the insolvent, annexed thereto, taken on

the day of the presentation thereof, to the effect, that the petition is

in all respects true in matter of fact.

Petitioner's schedule. The petitioner must annex to his

petition, a schedule, in all respects similar to that required of an

insolvent, as prescribed in section sixty-three of this chapter.

Petitioner's affidavit. An affidavit, in the following form,

subscribed and taken by the petitioner, before the county judge, or, in

the city of New York, before a justice of the supreme court, must be

annexed to the schedule:

"I, ---------, do swear" (or "affirm," as the case may be,) "that the

matters of fact, stated in the schedule hereto annexed, are, in all

respects, just and true; that I have not, at any time, or in any manner

whatsoever, disposed of or made over any part of my property, not exempt

by express provision of law from levy and sale by virtue of an

execution, for the future benefit of myself or my family, or disposed of

or made over any part of my property, in order to defraud any of my

creditors; and that I have not paid, secured to be paid, or in any way

compounded with, any of my creditors, with a view that they or any of

them should abstain from opposing my discharge."

Order to show cause. The petition, and the papers annexed

thereto, must be presented to the court, and filed with the clerk. The

court must thereupon make an order, requiring all the creditors of the

petitioner to show cause before it, at a time and place therein

specified, why the prayer of the petitioner should not be granted; and

directing that the order be published and served, in the manner

prescribed in section sixty-six of this chapter for the publication and

service of an order, made as therein prescribed.

Proceedings on return of order. The provisions of sections

sixty-seven, sixty-eight, sixty-nine, seventy, seventy-one,

seventy-three, and seventy-four of this chapter apply to a special

proceeding, taken as prescribed in this article.

Order directing assignment; assignment pursuant thereto. An

order, directing the execution of an assignment, must be made by the

court, where it appears, by the verdict of the jury, or, if a jury has

not been demanded, or the jurors have been discharged by reason of their

inability to agree, where it satisfactorily appears to the court, as

follows:

1. That the petitioner is unable to pay his debts.

2. That the schedule annexed to his petition is true.

3. That he has not been guilty of any fraud or concealment, in

violation of the provisions of this article.

4. That he has, in all things, conformed to the matters required of

him by this article.

The provisions of sections seventy-six, seventy-seven, and

seventy-eight of this chapter apply to the order prescribed in this

section, and to the assignment made in pursuance thereof, except that

the trustee or trustees must be nominated, as well as appointed, by the

court.

When discharge to be granted; effect thereof. Upon the

production by the petitioner, of the certificates of the trustee or

trustees, and the county clerk, to the effect prescribed in section

seventy-nine of this chapter, the court must grant to the petitioner a

discharge, declaring that the petitioner is forever thereafter exempted

from arrest or imprisonment, by reason of any debt due at the time of

making the assignment, or contracted before that time, though payable

afterwards; or by reason of any liability incurred by him, by making or

indorsing a promissory note, or by accepting, drawing, or indorsing a

bill of exchange, before the execution of the assignment; or in

consequence of the payment, by any party to such a note or bill, of the

whole or any part of the money secured thereby, whether the payment is

made before or after the execution of the assignment, with the

exceptions specified in section one hundred and thirty-eight of this

chapter. The discharge shall have the effect therein declared, as

prescribed in this section.

Discharge and other papers to be recorded. The provisions of

section eighty-two of this chapter apply to the discharge, and to the

petition and other papers upon which it was granted.

Petitioner to be released from imprisonment. If, at the time

the discharge is granted, the petitioner is imprisoned, by virtue of an

execution against his person issued, or of an order of arrest made, in

an action or special proceeding founded upon a debt, liability, or

judgment, as to which he is exempted from arrest or imprisonment, as

prescribed in the last section but one, the officer must forthwith

release him, on production of the discharge, or a certified copy of the

record thereof.

Debts and demands not affected. A debt, demand, judgment, or

decree, against an insolvent, discharged as prescribed in this article,

is not affected or impaired by the discharge; but it remains valid and

effectual, against all his property, acquired after the execution of the

assignment. The lien, acquired by or under a judgment or decree, upon

any property of the insolvent, is not affected by the discharge.

Discharge, when void. A discharge, granted to an insolvent as

prescribed in this article, is void, in the same cases, so far as they

are applicable, in which a discharge, granted as prescribed in article

third of this chapter, is therein declared to be void; and the validity

of such a discharge may be tested in the same manner.

Who may be discharged. A person, imprisoned by virtue of an

execution to collect a sum of money, issued in a civil action or special

proceeding, may be discharged from the imprisonment, as prescribed in

this article. A person who has been admitted to the jail liberties, is

deemed to be imprisoned, within the meaning of this article.

To what court application to be made. Application for such a

discharge must be made by petition, addressed to the court from which

the execution issued; or to the county court of the county in which he

is imprisoned; or, if he is imprisoned in the city of New York, to the

supreme court.

When petition may be presented. A person so imprisoned may

apply for such a discharge, at any time; unless the sum, or, where he is

imprisoned by virtue of two or more executions, the aggregate of the

sums, for which he is imprisoned, exceeds five hundred dollars; in which

case, he cannot present such a petition, until he has been imprisoned,

by virtue of the execution or executions, for at least three months.

Contents of petition; schedule. The petition must be in

writing; it must be signed by the petitioner; and it must state the

cause of his imprisonment, by setting forth a copy, or the substance of

the execution, or, if there are two or more executions, of each of them.

The petitioner must annex thereto, and present therewith, a schedule,

containing a just and true account of all his property, and of all

charges affecting the same; as the property and charges existed at the

time when he was first imprisoned, and also as they exist at the time

when the petition is prepared; together with a just and true account of

all deeds, securities, books, vouchers, and papers, relating to the

property, and to the charges thereupon.

Affidavit of petitioner. An affidavit, in the following form,

subscribed and taken by the petitioner, on the day of the presentation

of the petition, must be annexed to the petition and schedule:

"I, ----------, do swear" (or "affirm," as the case may be), "that the

matters of fact, stated in the petition and schedule hereto annexed,

are, in all respects, just and true; and that I have not, at any time or

in any manner whatsoever, disposed of or made over any part of my

property, not exempt by express provision of law from levy and sale by

virtue of an execution, for the future benefit of myself or my family,

or disposed of or made over any part of my property, with intent to

injure or defraud any of my creditors."

Notice to creditors. At least fourteen days before the petition

is presented, the petitioner must serve, upon the creditor in each

execution, by virtue of which he is imprisoned, a copy of the petition,

and of the schedule; together with a written notice of the time when,

and place where, they will be presented. If, by reason of changes

occurring after the service, it is necessary, before presenting the

petition and schedule, to correct any statement contained in the

schedule, the correction may be made by a supplemental schedule, a copy

of which need not be served, unless the court so directs.

Notice to creditors; when service cannot be made. The papers,

specified in the last section, may be served, either upon the creditor

or his representative, or upon the attorney whose name is subscribed to

the execution; and, in either case, in the manner prescribed in the

civil practice law and rules for the service of a paper upon an

attorney, in an action in the supreme court. Where it is made to appear

by affidavit, to the satisfaction of the court, that service cannot,

with due diligence, be so made within the state, upon either, the court

may make an order, prescribing the mode of service, or directing the

publication of a notice in lieu of service, in such manner and for such

a length of time, as it thinks proper; and thereupon, it may direct an

adjournment of the hearing to such a time as it thinks proper.

Notice to creditors; when state a creditor. Where the state is

a creditor, the papers must be served upon the attorney-general, who

must represent the state in the proceedings.

Proceedings on presentation of petition. Upon the presentation

of the petition, schedule, and affidavit, with due proof of service or

publication, as prescribed in the last three sections, the court must

make an order, directing the petitioner to be brought before it, on a

day designated therein; and on that day, or on such other days as it

appoints, the court must, in a summary way, hear the allegations and

proofs of the parties. If the court is satisfied that the petition and

schedule are correct, and that the petitioner's proceedings are just and

fair, it must make an order, directing the petitioner to execute, to one

or more trustees, designated in the order, an assignment of all his

property, not expressly exempt by law from levy and sale by virtue of an

execution; or of so much thereof as is sufficient to satisfy the

execution or executions, by virtue of which he is imprisoned.

Adjournment. Upon sufficient cause being shown by a creditor,

the court may, from time to time, adjourn the hearing; but not to a day

later than three months after the presentation of the petition.

Proceedings on adjourned day. An objection to a matter of form

shall not be received upon an adjourned day; and, unless the opposing

creditor satisfies the court that the proceedings on the part of the

petitioner are not just and fair, the court must direct an assignment,

as prescribed in the last section but one, and must grant a discharge,

as prescribed in the following sections of this article.

Assignment; effect thereof. The assignment must be acknowledged

or proved, and certified, in like manner as a deed to be recorded in the

county, and must be recorded in the clerk's office of the county where

the petitioner is imprisoned. Where it appears, from the schedule or

otherwise, that real property will pass thereby, the assignment must

also be recorded as a deed, in the proper office for recording deeds, of

each county where the real property is situated. The assignment vests in

the trustee or trustees, for the benefit of the judgment creditors in

the executions, by virtue of which the petitioner is imprisoned, all the

estate, right, title, and interest of the petitioner in and to the

property, so directed to be assigned.

Discharge; when to be granted. Upon the production, by the

petitioner, of satisfactory evidence, that the petitioner has actually

delivered to the trustee or trustees all the property so directed to be

assigned, which is capable of delivery; or upon the petitioner's giving

security, approved by the court, for the future delivery thereof; the

court must make an order, discharging the petitioner from imprisonment,

by virtue of each execution, specified in his petition. The sheriff,

upon being served with a certified copy of the order, must discharge the

petitioner as directed therein, without any detention on account of

fees.

Petitioner's property still liable. Notwithstanding such a

discharge, the judgment creditor in the execution has the same remedies,

against the property of the petitioner, for any sum due upon his

judgment, which he had before the execution was issued; but the

petitioner shall not, except as is otherwise specially prescribed in the

next section, be again imprisoned by virtue of an execution upon the

same judgment, or arrested in an action thereupon.

When creditor may issue new execution against person. If the

petitioner is convicted of perjury, committed in any of the proceedings

upon his petition, any judgment creditor, by virtue of whose execution

he was imprisoned, may issue a new execution against his person.

Powers and duties of trustee. The trustee must collect the

demands, and sell the other property assigned to him. He must apply the

proceeds thereof, after deducting his commissions and expenses allowed

by law, as follows:

1. To the payment of the jail fees, upon the imprisonment and

discharge of the petitioner.

2. If any surplus remains, to the payment of the creditors, by virtue

of whose executions the petitioner was imprisoned, when he presented his

petition; or, if there is not enough to pay them in full, to the

payment, to each, of a proportionate part of the sum due upon his

execution.

3. If any surplus remains, he must pay it over to the petitioner, or

his executor or administrator.

Personal service upon a creditor, or his attorney, of written notice

of the time and place of making a distribution, as prescribed in

subdivision second of this section, has the same effect as publishing a

notice thereof, in a case prescribed by law.

Creditor may notify debtor to apply for discharge. Where a

person has been imprisoned by virtue of an execution, for the space of

three months after he was entitled, by the provisions of this article,

to apply for a discharge; and has neither made such an application, nor

applied for his discharge under the provisions of article third of this

chapter; the judgment creditor, by virtue of whose execution he is

imprisoned, may serve upon the prisoner a written notice, requiring him

to apply for his discharge, according to the provisions of this article.

Effect of failure so to apply. If the prisoner does not, within

thirty days after personal service of such a notice, either present a

petition to the proper court, as prescribed in article third of this

chapter, or serve, upon the creditor giving the notice, a copy of a

petition and schedule, with a notice of his intention to apply for his

discharge, as prescribed in this article; or if, after such a

presentation or service, he does not diligently proceed thereupon to a

decision, he shall be forever barred from obtaining his discharge under

the provisions of this article, or of article third of this chapter.

Debtors to state or United States not to be discharged. Neither

of the following named persons shall be discharged from imprisonment,

under the provisions of this article:

1. A person owing a debt or duty to the United States.

2. A person owing a debt or duty to the state, for taxes or for money

received or collected by any person, as a public officer or in a

fiduciary capacity, or a cause of action specified in section

sixty-three-c of the executive law or a judgment recovered upon such a

cause of action.

Discharge on application of taxpayer. Where a person has been

arrested by virtue of an execution issued upon a judgment of fifty

dollars or under, and has been kept imprisoned at the expense of the

county for six months or over, the court out of which the execution

issued may, on the application of a taxpayer of the county to which the

support is chargeable, and upon due proof of the service upon the person

in whose favor such execution was issued, of a notice in writing of the

time when and the place where such application is to be made, at least

eight days before the making thereof discharge the prisoner, and it

shall be the duty of the sheriff to forthwith release him from custody.

Cancellation of record of judgment discharged in bankruptcy. 1.

At any time after one year has elapsed since a bankrupt or debtor was

discharged from his debts, pursuant to the acts of congress relating to

bankruptcy, the bankrupt or debtor, his receiver, trustee or any other

interested person or corporation, may apply, upon proof of the

bankrupt's or debtor's discharge, to the court in which a judgment was

rendered against him, or if rendered in a court not of record, to the

court of which it has become a judgment by docketing it therein, for an

order, directing that a discharge or a qualified discharge of record be

marked upon the docket of the judgment.

2. If it appears upon the hearing that the bankrupt or debtor has been

discharged from the payment of that judgment or the debt upon which it

was recovered, an order must be made directing that a discharge or

qualified discharge be marked on the docket of the judgment.

3. If it appears that any lien of the judgment upon real property

owned by the bankrupt or debtor prior to the commencement of the

bankruptcy proceedings was invalidated or surrendered in the bankruptcy

proceedings or set aside in an action brought by the receiver or

trustee, the order shall direct that a discharge be marked on the docket

of the judgment.

4. If (a) it does not appear whether the judgment was a lien on real

property owned by the bankrupt or debtor prior to the commencement of

the bankruptcy proceedings, or (b) if it appears that the judgment was a

lien on such real property and it is not established to the satisfaction

of the court that the lien was invalidated or surrendered in the

bankruptcy proceedings or set aside in an action brought by the receiver

or trustee, the order shall direct that a qualified discharge be marked

on the docket of the judgment. If the court directs that a qualified

discharge be marked on the docket of the judgment it shall specify in

its order which of the two grounds stated above was the basis of its

order.

5. Upon presentation of the order for entry, or of a certified copy

thereof for filing, as the case may be, and upon payment of the fees to

which he is entitled, the clerk of the court where the order was made,

or the clerk of any court where a transcript of the judgment has been

filed and docketed, shall mark on the docket thereof an entry

substantially as follows: In the case of a discharge, "Discharged by

order of the court; see order entered (or filed) ................

(stating the date of entry or filing of the order)"; in the case of a

qualified discharge, "Qualified discharge by order of the court; see

order entered (or filed) .......... (stating the date of the entry or

filing of the order)."

6. Notice of the application, accompanied by copies of the papers upon

which it is made, must be served upon the judgment creditor, or his

attorney of record in the action in which the judgment was rendered, in

the manner as prescribed for service of a notice in an action, if the

residence or place of business of the judgment creditor, or of his

attorney, is known. Upon proof by affidavit that the address of neither

the judgment creditor nor his attorney is known, and that the address of

neither can be ascertained after due diligence, or that the judgment

creditor is a non-resident of this state, and his attorney is dead, or

removed from the state, or cannot be found within the state, a judge or

justice of the court may, by order, direct that the notice of the

application be published in a newspaper designated in the order, once a

week for not more than three weeks. Such publication, shown by the

affidavit of the publisher, shall be sufficient service upon the

judgment creditor, of the application.

Right of set off against unmatured debts. Every debtor shall

have the right upon:

(a) the filing of a petition under any of the provisions of the

federal bankruptcy act or amendments thereto or the commencement of any

proceeding under any foreign bankruptcy, insolvency, debtor relief or

other similar statute or body of law, by or against a creditor;

(b) the making of an assignment by a creditor for the benefit of its

creditors;

(c) the application for the appointment, or the appointment, of any

receiver of, or of any of the property of a creditor;

(d) the issuance of any execution against any of the property of a

creditor;

(e) the issuance of a subpoena or order, in supplementary proceedings,

against or with respect to any of the property of a creditor; or

(f) the issuance of a warrant of attachment against any of the

property of a creditor,

to set off and apply against any indebtedness, whether matured or

unmatured, of such creditor to such debtor, any amount owing from such

debtor to such creditor, at or at any time after, the happening of any

of the above mentioned events, and the aforesaid right of set off may be

exercised by such debtor against such creditor or against any trustee in

bankruptcy, debtor in possession, assignee for the benefit of creditors,

receiver or execution, judgment or attachment creditor of such creditor,

or against anyone else claiming through or against such creditor or such

trustee in bankruptcy, debtor in possession, assignee for the benefit of

creditors, receivers, or execution, judgment or attachment creditor,

notwithstanding the fact that such right of set off shall not have been

exercised by such debtor prior to the making, filing or issuance, or

service upon such debtor of, or of notice of, any such petition;

assignment for the benefit of creditors; appointment or application for

the appointment of a receiver; or issuance of execution, subpoena or

order or warrant.

Trustees for creditors. All trustees, appointed under any

authority, conferred by articles three, four and five of this chapter,

in the several cases therein contemplated, are hereby declared to be

trustees of the estate of the debtor, in relation to whose property they

shall be appointed, for the benefit of his creditors; and shall be

vested with all the powers and authority hereinafter specified, and

shall be subject to the control, obligations and responsibilities

hereinafter declared.

Sole trustee. When one trustee only shall be appointed, all

the provisions herein contained, in reference to several trustees, shall

apply to him.

Two or more trustees. When there are more trustees than one

appointed, the debts and property of the debtor may be collected and

received by any one of them; and when there are more than two trustees

appointed, every power and authority conferred by this chapter on the

trustees, may be exercised by any two of them.

Death of trustee; survivor or successor. The survivor or

survivors of any trustee, shall have all the powers and rights given by

this chapter to trustees. All property in the hands of any trustee at

the time of his death, removal or incapacity, shall be delivered to the

remaining trustee or trustees, if there be any; or to the successor of

the one so dying, removed or incapacitated; who may demand and sue for

the same.

Trustees' oath. Before proceeding to the discharge of any of

their duties, all such trustees shall take and subscribe an oath, that

they will well and truly execute the trust by their appointment reposed

in them, according to the best of their skill and understanding; which

oath shall be filed with the court that appointed them.

Vesting of property in trustees. The trustees taking such oath,

shall be deemed vested with all the estate, real and personal, of such

debtor, except such as is exempted by articles three, four and five from

the execution of the assignment, in said articles directed.

Powers of trustees. The said trustees shall have power:

1. To sue in their own names or otherwise, and recover all the estate,

debts and things in action, belonging or due to such debtor, in the same

manner and with the like effect as such debtor might or could have done

if no trustees had been appointed, and no set-off shall be allowed in

any such suit, for any debt, unless it was owing to such creditor, by

such debtor, before presenting the petition of the insolvent under said

articles. But no suit in equity shall be brought by assignees of

insolvents under the third or fourth articles, without the consent of

the creditors having a major part of the debts which shall have been

exhibited and allowed, unless the sum in controversy exceeds five

hundred dollars;

2. To take into their hands, all the estate of such debtor, whether

delivered to them, or afterwards discovered; and all books, vouchers and

securities relating to the same;

3. From time to time, to sell at public auction, all the estate, real

and personal, vested in them, which shall come to their hands, after

giving at least fourteen days' public notice of the time and place of

sale, and also publishing the same for two weeks in a newspaper, printed

in the county, where the sale shall be made, if there be one;

4. To allow such credit on the sale of real property by them, as they

shall deem reasonable, not exceeding eighteen months, for not more than

three-fourths of the purchase money; which credit shall be secured by a

bond or note of the purchaser, and a mortgage on the property sold;

5. On such sales, to execute the necessary conveyances and bills of

sale;

6. To redeem all real or personal property subject to a security

interest or mortgage, and to satisfy any judgments which may be an

incumbrance on any property so sold by them; or to sell such property

subject to such mortgages, security interests or judgments;

7. To settle all matters and accounts between such debtor, and his

debtors, or creditors, and to examine any person touching such matters

and accounts, on oath, to be administered by either of them;

8. Under the order of the court appointing them, to compound with any

person indebted to such debtor, and thereupon to discharge all demands

against such person.

Notice to debtors, bailees and creditors. The trustees,

immediately upon their appointment, shall give notice thereof for at

least three weeks in a newspaper published in the county where

application was made and therein shall require:

1. All persons indebted to such debtor, by a day and at a place

therein to be specified, to render an account of all debts and sums of

money owing by them respectively, to such trustees, and to pay the same;

2. All persons having in their possession any property or effects of

such debtor, to deliver the same to the said trustees by the day so

appointed;

3. All the creditors of such debtor to deliver their respective

accounts and demands to the trustees or one of them, by a day to be

therein specified, not less than forty days from the first publication

of such notice.

Power to sue notwithstanding notice. Notwithstanding any such

notice, the trustees may sue for and recover, any property or effects of

the debtor, and any debts due to him, at any time, before the day

appointed for the delivery or payment thereof.

Forfeiture for failure to comply with notice. Every person

indebted to such debtor, or having the possession or custody of any

property or thing in action, belonging to him, who shall conceal the

same, and not deliver a just and true account of such indebtedness, or

not deliver such property or thing in action, to the trustees or one of

them, by the day for that purpose appointed, shall forfeit double the

amount of such debt, or double the value of such property so concealed;

which penalties may be recovered by the trustees.

Warrant on withholding account or property. Whenever the

trustees shall show by their own oath, or other competent proof, to the

satisfaction of any judge of a county court, or in the county of New

York any justice of the supreme court, that there is good reason to

believe that the debtor, the spouse of the debtor, or any other person

has concealed or embezzled any part of the estate of such debtor vested

in the said trustees; or that any person can testify concerning the

concealment or embezzlement thereof; or that any person who shall not

have rendered an account as above required, is indebted to such debtor,

or has property in his or her custody or possession, belonging to such

debtor; such judge or justice shall issue a warrant, commanding any

sheriff or constable, to cause such debtor, the spouse of the debtor, or

other person, to be brought before him at such time and place as he

shall appoint, for the purpose of being examined.

Examination of person arrested. The judge or justice issuing

such warrant, shall examine every person so brought before him, on oath,

in the presence of the trustees or any of them, touching all matters

relative to the debtor, his dealings and estate, and touching the

detention or concealment of any part of his property, and touching the

indebtedness of any person to such debtor; and shall reduce the

examination to writing; which the person so examined is hereby required

to sign, and which shall be attested by the judge or justice.

Imprisonment for contumacy. If any person so brought before

such judge or justice, shall refuse to be sworn, or to answer

satisfactorily, all lawful questions put to him, or shall refuse to sign

the examination, not having a reasonable objection thereto, to be

allowed by such judge or justice, the judge or justice shall by warrant

commit such person to prison, there to remain without bail, until he

shall submit to be sworn or to answer as required, or to sign such

examination; in which warrant the particular default of the person

committed shall be specified; and if it be in not answering any

question, such question shall also be specified therein.

No discharge for defects of form. If any person so committed,

shall bring a writ of habeas corpus, he shall not be discharged by

reason of any insufficiency in the form of the warrant of commitment;

but the court before whom such person shall be brought, shall re-commit

such person, unless it shall be made to appear that he has answered all

lawful questions put to him, or had sufficient reason for refusing to

sign the examination, as the case may be; or unless such person shall

then answer, on oath, the questions so put to him.

Penalties for connivance at escape. Any sheriff, constable or

jailer wilfully suffering any person so committed or re-committed,

pursuant to the foregoing sections, to escape, on conviction thereof, in

addition to any other punishment the court may inflict, shall forfeit to

the trustees a sum equal to the whole amount of debts due to the

creditors of such debtor, not exceeding two thousand five hundred

dollars.

Effect of answers on examination. The person so examined, and

answering to the satisfaction of the court, shall not be liable to any

penalty imposed for concealing and not delivering any property, or

paying any debt; but his answers on such examination, may be given in

evidence in the same manner, and with the like effect, as if he had been

examined by such trustees in an action brought by them against him for

the recovery of such property or debt.

Reward to informers. Any person who shall discover to the

trustees any secreted effects, property or things in action, belonging

to such debtor, so that they shall be recovered by them, shall be

entitled to ten dollars on the hundred dollars, and at that rate, on the

value of the effects so discovered, to be paid by the trustees, out of

the estate of such debtor; but this section shall not extend to persons

who have such property, effects or things, in their own possession.

Reference of disputed claims. If any controversy shall arise

between the trustees and any other person in the settlement of any

demands against such debtor, or of debts due his estate, the same may be

referred to one or more indifferent persons, who may be agreed upon by

the trustees and the party with whom such controversy shall exist, by a

writing to that effect signed by them.

Application for appointment of referee. If such referee or

referees be not selected by agreement, then the trustees or the other

party to the controversy, provided no action at law is pending arising

out of any such debts or demands, may serve a notice of their intention

to apply to a judge of the court which appointed said trustees, or to

any justice of the supreme court at chambers, residing in the same

district with said trustees, for the appointment of one or more

referees, specifying the time and place when such application will be

made, which notice shall be served at least ten days before the time so

therein specified.

Appointment of referee. On the day so specified, upon due proof

of the service of such notice, the judge or justice before whom the

application is made may in his discretion proceed to select one or more

referees, the same in all respects as they are now selected according to

the rules and practice of the supreme court.

Entry of order of reference. The judge or justice by whom they

shall be selected, shall certify such selection in writing. Such

certificate, or the written agreement of the parties, shall be filed by

the trustees in the office of the clerk where the order appointing the

trustees is entered; and an order shall thereupon be entered by such

clerk appointing the persons so selected referees to determine the

controversy.

Powers, duties and compensation of referees. Such referees

shall have the same powers, and be subject to the like duties and

obligations, and shall receive the same compensation, as referees

appointed by the supreme court, in actions pending therein.

Filing and effect of referees' report. The report of the

referees shall be filed in the same office where the order for their

appointment was entered, and shall be conclusive on the rights of the

parties, if not set aside by the court.

Commission to take testimony out of county. When any witness to

such controversy shall reside out of the county where the said trustees

resided at the time of their appointment, the referee or referees

appointed to hear said controversy shall have power to issue a

commission or commissions in like manner as justices of the peace are

now authorized to issue the same, and the testimony so taken shall be

returned to said referee or referees in the same manner, and be read

before them on a hearing, in like manner as testimony taken on

commission before justices of the peace.

Sale of property and accounts of trustees. The trustees shall,

as speedily as possible, convert the estate, real and personal, of such

debtor, into money. They shall keep a regular account of all moneys

received by them as trustees; to which, every creditor, or other person

interested therein, shall be at liberty, at all reasonable times, to

have recourse.

Meeting of creditors and notice thereof. The trustees, within

fifteen months from the time of their appointment, shall call a general

meeting of the creditors of such debtor, by a notice to be published in

the same manner, as hereinbefore directed respecting the publication of

the notice of their appointment; in which notice, they shall specify the

place and time of such meeting, which time shall not be more than three

months, nor less than two months after the first publication of such

notice. Every such notice shall be published at least once in each week,

until the time of such meeting.

Proceedings at creditors' meetings. At such meeting, or other

adjourned meeting thereafter, all accounts and demands, for and against

the estate of such debtor, shall be fairly adjusted, as far as the same

can be ascertained, and the amount of moneys in the hands of the

trustees declared.

Payment of disbursements and commissions of trustees. Out of

the moneys in their hands, the trustees may first deduct all the

necessary disbursements made by them in the discharge of their duty, and

a commission at the rate of five per centum on the whole sum which shall

have come into their hands.

Preferred debts. They shall pay all debts due by such debtor to

the United States, and all debts due by him to persons who, by the laws

of the United States, have a preference in consequence of having paid

money as sureties of such debtor.

Distribution of moneys. They shall distribute the residue of

the moneys in their hands, among all those who shall have exhibited

their claims as creditors, and whose debts shall have been ascertained,

in proportion to their respective demands, and without giving any

preference to debts due on specialties, as follows:

1. In proceedings under the third and fourth articles of this chapter,

among those who were creditors at the time of the execution of the

assignment by the insolvent;

2. In proceedings under the fifth article, among those creditors, at

whose suit the debtor was imprisoned on execution at the time of his

discharge.

Preference of debts owing by debtor as trustee. In making such

distribution, the trustees shall first pay all debts that may be owing

by the debtor as guardian, executor, administrator or trustee; and if

there be not sufficient to pay all debts of the character above

specified, then a distribution shall be made among them, in proportion

to their amounts respectively.

Payment of debts before maturity. Every person to whom a

debtor, except one proceeding under the fifth article, shall be indebted

on a valuable consideration, for any sum of money not due at the time of

such distribution, but payable afterwards, shall receive his proportion

with other creditors, after deducting a rebate of legal interest upon

the sum distributed, for the time unexpired of such credit.

Set-off of mutual debts or credits. Where mutual credit has

been given by any debtor, except a debtor proceeding under the fifth

article of this chapter, and any other person, or mutual debts have

subsisted between such debtor and any other person, the trustees may set

off such credits or debts, and pay the proportion or receive the balance

due. But no set-off shall be allowed of any claim or debt, which would

not have been entitled to a dividend as hereinbefore directed.

No set-off in certain cases. No set-off shall be allowed by

such trustees, of any claim or debt, which shall have been purchased by,

or transferred to, the person claiming its allowance, which could not

have been set off by him, according to the provisions of this article,

in a suit brought by such trustees.

Provision for pending actions. If, at the time any dividend is

made, any action or proceeding be pending against the trustees, in which

a demand against such debtor may be established, the trustees may retain

in their hands, the proportion which would belong to such demand if

established, and the necessary costs and expenses of such action or

proceeding, to be applied according to the event of such proceeding or

action, or to be distributed in a second or other dividend.

Provision for contingent or unliquidated liabilities. If, at

the time any dividend is made, there shall be a contingent or

unliquidated claim against the debtor or an outstanding bond,

recognizance or undertaking upon which the debtor shall have been

principal, surety or indemnitor, the trustees must retain in their hands

for such period or periods as the court having jurisdiction of the

matter may by order direct a sum of money sufficient to pay a due or

equal proportion of said dividend upon such contingent or unliquidated

claim or liability if and when the same shall be established and

liquidated.

Penalties recovered. All penalties which shall be recovered by

any trustees, pursuant to the provisions of this article, shall be

deemed a part of the estate of the debtor, and shall be distributed as

such among his creditors.

Subsequent dividends. If the whole of such debtor's estate be

not distributed on the first dividend, the trustees shall, within one

year thereafter, make a second dividend of all the moneys belonging to

the estate of the debtor, then in their hands, among the creditors

entitled thereto as hereinbefore specified; and in the same manner from

year to year, so long as any moneys belonging to the estate of such

debtor shall remain in the hands of the trustees, they shall make a

dividend thereof among the creditors entitled thereto.

Provision for neglectful creditors. Any creditor who shall have

neglected to deliver to the trustees an account of his demand, before

the first, second, third or other dividend, and who shall deliver his

account to them before the second, or other subsequent dividend, shall

receive the sum he would have been entitled to, on any former dividend,

before any distribution be made to other creditors.

Unclaimed dividends. If any dividend that shall have been

declared, shall remain unclaimed by the person entitled thereto for one

year after the same was declared, the trustees shall consider it as

relinquished, and shall distribute it, on any subsequent dividend, among

the other creditors.

Disposition of surplus. If after settling the estate of any

debtor, and after discharging his debts, entitled to a dividend, any

surplus shall remain in the hands of his trustees, the same shall be

paid to such debtor or his legal representatives.

Allowance to debtor. Every debtor who shall be discharged under

the third or fourth articles of this chapter shall be allowed the sum of

five per centum on the net produce of all his estate, that shall be

received by the assignees, to be paid to him by them, in case such net

produce, after such allowance made, shall be sufficient to pay the

creditors of such debtor, entitled to a dividend, the sum of seventy

cents on the dollar, on the amount of their debts respectively, as the

same shall have been ascertained; but the said allowance shall not

exceed in the whole, the sum of five hundred dollars.

Accounting by trustees. Within ten days after any dividend made

by any trustees, they shall render on oath and file with the clerk of

the court where the order appointing them was entered an account in

writing of all their proceedings in the premises, stating:

1. Their disbursements, commissions and the dividends made by them;

2. The names and residences of the creditors to whom dividends were

made, and the names of those actually receiving them;

3. The property, moneys and effects of the debtor remaining in their

hands, and the value and situation of such property.

And such trustees may at any time be compelled by an order of the

supreme court, or of the county court of the county in which they

reside, to render such account on oath, on the application of the

debtor, or of any creditor.

Trustees subject to order of court. Such trustees shall be

subject to the order of the supreme court, and of the county court of

the county in which they were appointed, upon the application of any

creditor, or of any debtor in respect to whom they were appointed, in

relation to the execution of any of the powers and duties confided to

them; and they may be removed by such court, for cause shown.

Appointment of substitute trustee. Whenever any trustee shall

be removed, or shall die, or become incapacitated to perform his duties,

the court which originally appointed such trustee, after giving notice,

and an opportunity to the creditors to propose proper persons, may

appoint another in the place of such trustee, who shall, in all

respects, have the like powers and authority, and be subject to the same

control, obligations and responsibilities; and the said appointment

shall be certified and recorded, as the original appointment was

required to be recorded.

Application by trustee for leave to renounce. Any trustee

appointed pursuant to the provisions of this chapter who shall be

desirous of renouncing the trust vested in him, may apply to the court

from whom his appointment was received, for an order to all persons

interested, to show cause why such renunciation should not be accepted.

Account upon application. Such application shall be accompanied

by a full, true and just account of all the transactions of such

trustees, in that character, and particularly of the property, moneys

and effects received by him; of all payments made, whether to creditors

or otherwise; and of the remaining effects and estate of the debtor, in

respect to whom, or whose estate, he was appointed trustee, within his

knowledge, and the situation of the same.

Verification of account. To such account shall be annexed the

affidavit of the trustee, that the said account is in all respects just

and true, according to the best of his knowledge and belief.

Order to show cause. The court shall thereupon grant an order,

directing notice to be given to all persons interested in the estate of

the debtor, in respect to whom or whose estate such trustee was

appointed, to show cause on a day, or at a term and at a place therein

to be specified, why he should not be permitted to renounce his

appointment.

Publication of notice. Such notice shall be published, once in

each week, for four weeks successively, in such newspapers, as such

court shall direct.

Hearing. On the day appointed for such hearing, and on such

other days as shall from time to time be appointed, if it shall appear

that notice was duly published, the court shall proceed to hear the

proofs and allegations of the parties.

Order permitting renunciation. If it shall appear that the

proceedings of such trustee, in relation to his trust, have been fair

and honest, and particularly in the collection of the property and debts

vested in him; and if such court be satisfied, that for any reason, it

is inexpedient for such trustee to continue in the execution of the

duties of his appointment, and that such duties can be executed by

another trustee, without injury to the estate of the debtor, or to the

creditors; and if no good cause to the contrary appear, the court shall

grant an order, allowing such trustee to renounce his appointment, and

to assign the property and effects of the debtor.

Assignment by renouncing trustee. Such assignment shall be

executed by such trustee, to such person, or persons, as the court shall

appoint for that purpose; and in the appointment, such persons as shall

have been named to be assignees by the creditors of such debtor, or by

the major part of them, shall be preferred, if approved by such court.

Effect of assignment. Such assignment shall transfer to the

persons to whom it shall be made, all the remaining estate and effects,

vested in the trustee so renouncing; and such new assignee shall have

the same powers, be subject to the same duties, and be entitled to the

same compensation, as the original trustee; and shall continue any suit

that may have been commenced by such original trustee, in his name, or

in that of such new assignee.

Order for discharge of trustee from trust. Upon producing to

the court allowing such assignment, the certificate of the assignee,

duly proved by the oath of a subscribing witness, that such assignment

has been duly made, and the property capable of delivery, belonging to

such debtor, together with all the books, vouchers and documents,

relating to the estate of such debtor, has been duly delivered; and also

a certificate of the county clerk, that such assignment has been

recorded; such court shall grant to the trustee so applying, an order

that he be discharged from his trust.

Effect of order. Upon such order being granted, such trustee

shall be discharged from the trust reposed in him, and his power and

authority shall thereupon cease; but he shall, notwithstanding, remain

subject to any liability he may have incurred, at any time previous to

the granting of such order, in the management of his trust.

Recording order and filing papers. Such new assignment, upon

being duly proved or acknowledged, shall be recorded in the office of

the clerk of the county where the order appointing the original trustee

was entered; and the petition of the trustee, the affidavit and

proceedings thereon, with the certificate of the new assignee, shall be

filed in the same office.

Payment of expense of renunciation. The expense of all

proceedings in effecting such renunciation and assignment, shall be paid

by the trustee making the application.

New trustee in place of one absent. Whenever any trustee

appointed under any authority conferred by any of the provisions of

articles three, four or five of this chapter, shall remove from and

continue to reside out of this state for one year, it shall be lawful

for the court which originally appointed such trustee, after giving

notice and an opportunity to the creditors to propose proper persons, to

appoint another person in the place of such trustee.

Powers and duties of new trustee. The trustee appointed in the

place of the trustee so removed shall in all respects have the like

powers and authority, and be subject to the same control, obligations

and responsibilities as the trustee originally appointed; and the

appointment of such trustee shall be certified and recorded as the

original appointment was required to be recorded.

Notice to creditors of incompetent person or conservatee. A

court exercising jurisdiction over the property of an incompetent person

or conservatee may, upon the petition of a committee of the property of

such incompetent person or of the conservator of the property of such

conservatee, authorize him to advertise for creditors and other persons

interested in such estate, to present to him their claims with the

vouchers thereof, duly verified, and naming a post-office address at

which papers may be served on them by mail, as hereinafter provided, on

or before a day to be specified in such advertisement, not less than

thirty days from the last publication thereof, which advertisement or

notice shall be published in two newspapers to be designated by the

court as most likely to give notice to the persons to be served, not

less than once a week for four successive weeks, and a copy of such

notice securely inclosed in a post-paid wrapper, shall be deposited in

the post-office in the village or city where such committee or

conservator resides, addressed to each person interested in the estate

of such incompetent person or conservatee who shall appear from the

books or papers of such incompetent person or conservatee to be

interested in said estate, or who shall be known to said committee or

conservator to be so interested, at the proper post-office address of

such interested person, so far as said committee or conservator shall be

able to ascertain the same, at least thirty days prior to the time

limited in such notice for presentation of such claims.

Authority for committee or conservator to compromise claims. A

court exercising jurisdiction over the property of a person with a

mental illness, or conservatee may, upon the application of the

committee of the property of such incompetent person or the conservator

of the conservatee, and for good and sufficient cause shown, and upon

such terms as it may direct, authorize the committee or conservator to

sell, compromise or compound any claim or debt belonging to the estate

of the incompetent person or conservatee. But such authority shall not

prevent any party interested in the trust estate, from showing upon the

final accounting of such committee or conservator that such debt or

claim was fraudulently or negligently sold, compounded or compromised.

The sale of any debt or claim heretofore made in good faith by any such

committee or conservator, shall be valid, subject, however, to the

approval of the court, and the committee or conservator shall be charged

with and liable for, as a part of the trust fund, any sum which might or

ought to have been collected by him.

Payment by committee or conservator of claims. A committee of

the property of a person, incompetent by reason of mental illness, a

developmental disability or alcohol abuse, to manage his or her affairs,

or a conservator of the property of a conservatee, may, under direction

of the court exercising jurisdiction of such estate, after payment of

the expenses, disbursements and commissions of such trust, apply so much

of the funds and property of said estate remaining in his or her hands

as such committee or conservator, as may be necessary to pay and

discharge the proper claims of creditors who have presented claims

pursuant to the notice in this article provided for, to the payment of

such claims, and if the property so remaining be insufficient to pay

such claims in full, then the committee or conservator may distribute

the same according to law among the creditors who have presented and

proved their claims as in this article provided, and such payment, when

so made in good faith and under direction of such court, shall relieve

such committee or conservator and his or her sureties from liability to

creditors who have failed to present their claims as in this article

provided.

Citation to attend judicial settlement of accounts of committee

or conservator. A citation may be issued by the court to all parties

interested in the estate of such incompetent person or conservatee, as

creditors or otherwise, requiring them to appear in court on some day

therein to be specified, to make proof of their several claims if they

be creditors, and to show cause why a settlement of accounts and

proceedings of the committee or conservator up to the date of such

hearing should not be had, and if no cause be shown, to attend the

settlement of such account. All such citations must be returnable in

court, and said court when not otherwise engaged shall always be open

for proceedings under this article. Such citations may be issued on

petition of such committee or conservator, or of one or more of his

sureties, or of a creditor of such incompetent person or conservatee, or

other person interested in said estate; and when issued on a petition of

a committee, conservator, or his surety, it may be issued at any time

after the appointment of such committee or conservator, in any other

case, after lapse of one year from the appointment of such committee or

conservator, or upon his removal or resignation. A citation issued on

petition of a creditor may be addressed to and served on the committee

or conservator alone, but on or after the return of such citation, the

committee or conservator may have a general citation issued to all

parties interested.

Service of citation. A citation to the persons interested must

be served on all parties, other than the petitioner, who are interested

in the fund, including sureties of the committee or conservator; but the

court may, in its discretion, dispense with the service on such

incompetent person or conservatee, and, if the time limited by due

advertisement for presentation of claims has expired before the issue of

citation, creditors who have not duly presented their claims need not be

served. The court may, by order, direct such citation to be served on

creditors who have presented claims accompanied by post-office address,

as provided in section two hundred and fifty, by depositing a copy of

the same at least twenty days prior to the return day thereof in the

post-office at the place where such committee or conservator, resides,

duly inclosed and directed to each of such creditors at the post-office

address specified by him as provided in section two hundred and fifty,

with the postage prepaid, and publishing such citation once in each week

for at least four weeks prior to such return day in one or more

newspapers to be designated by the court as most likely to give notice

to such creditors. A citation personally served within the county where

such incompetent person or conservatee resided at the time of his

becoming incompetent or incapable of managing his affairs, or an

adjoining county, must be served at least eight days before the return

thereof; if in any other county, at least fifteen days before the return

thereof. The court may direct service to be made by publication, when it

is satisfied by affidavit or verified petition, either that the person

to be served is unknown or that his residence can not, after diligent

inquiry, be ascertained, or that he can not, after due diligence, be

found within the state. The order for such service must direct service

of the citation upon such person to be made by publication thereof in

one newspaper to be designated by the court as most likely to give

notice to the person to be served once a week for four weeks, and that a

copy of the citation be forthwith deposited in the post-office duly

inclosed and directed to each person so served at his last known place

of residence or post-office address, and the postage paid thereon, at

least thirty days before the return day thereof. When publication has

been ordered, personal service without the state made, if within the

United States, at least thirty days, or without the United States, at

least forty days before the return day, is equivalent to publication and

mailing. Personal service on minors, incompetent persons and

conservatees shall be made as prescribed by law for service of citations

issued by surrogates for final accounting, and personal service on one

or two or more creditors, claiming as co-partners or otherwise as joint

creditors shall be equivalent to personal services on all, and voluntary

appearance either in person or by attorney shall be equivalent to

personal service, and such appearance may be made by any one claiming an

interest, though not served, and such person shall thereupon become a

party to the proceeding.

Proceedings on return of citation. Upon the return of such

citation properly served, such court shall have the powers in relation

to such estates, claims, property and committee, which devolve on

courts, by virtue of section twenty-one, in relation to assignments and

assignees for benefit of creditors and such assigned estates.

Definitions. As used in this article:

(a) "Affiliate" means:

(1) a person that directly or indirectly owns, controls or holds with

power to vote, twenty percent or more of the outstanding voting

securities of the debtor, other than a person that holds the securities:

(i) as a fiduciary or agent without sole discretionary power to vote

the securities; or

(ii) solely to secure a debt, if the person has not in fact exercised

the power to vote;

(2) a corporation twenty percent or more of whose outstanding voting

securities are directly or indirectly owned, controlled or held with

power to vote, by the debtor or a person that directly or indirectly

owns, controls or holds, with power to vote, twenty percent or more of

the outstanding voting securities of the debtor, other than a person

that holds the securities:

(i) as a fiduciary or agent without sole discretionary power to vote

the securities; or

(ii) solely to secure a debt, if the person has not in fact exercised

the power to vote;

(3) a person whose business is operated by the debtor under a lease or

other agreement, or a person substantially all of whose assets are

controlled by the debtor; or

(4) a person that operates the debtor's business under a lease or

other agreement or controls substantially all of the debtor's assets.

(b) "Asset" means property of a debtor, but the term does not include:

(1) property to the extent it is encumbered by a valid lien;

(2) property to the extent it is generally exempt under non-bankruptcy

law; or

(3) an interest in property held in tenancy by the entirety to the

extent it is not subject to process by a creditor holding a claim

against only one tenant.

(c) "Claim", except as used in "claim for relief", means a right to

payment, whether or not the right is reduced to judgment, liquidated,

unliquidated, fixed, contingent, matured, unmatured, disputed,

undisputed, legal, equitable, secured or unsecured.

(d) "Creditor" means a person that has a claim.

(e) "Debt" means liability on a claim.

(f) "Debtor" means a person that is liable on a claim.

(g) "Electronic" means relating to technology having electrical,

digital, magnetic, wireless, optical, electromagnetic or similar

capabilities.

(h) "Insider" includes:

(1) if the debtor is an individual:

(i) a relative of the debtor or of a general partner of the debtor;

(ii) a partnership in which the debtor is a general partner;

(iii) a general partner in a partnership described in subparagraph

(ii) of this paragraph; or

(iv) a corporation of which the debtor is a director, officer, or

person in control;

(2) if the debtor is a corporation:

(i) a director of the debtor;

(ii) an officer of the debtor;

(iii) a person in control of the debtor;

(iv) a partnership in which the debtor is a general partner;

(v) a general partner in a partnership described in subparagraph (iv)

of this paragraph; or

(vi) a relative of a general partner, director, officer or person in

control of the debtor;

(3) if the debtor is a partnership:

(i) a general partner in the debtor;

(ii) a relative of a general partner in, a general partner of or a

person in control of the debtor;

(iii) another partnership in which the debtor is a general partner;

(iv) a general partner in a partnership described in subparagraph

(iii) of this paragraph; or

(v) a person in control of the debtor;

(4) an affiliate, or an insider of an affiliate as if the affiliate

were the debtor; and

(5) a managing agent of the debtor.

(i) "Lien" means a charge against or an interest in property to secure

payment of a debt or performance of an obligation, and includes a

security interest created by agreement, a judicial lien obtained by

legal or equitable process or proceedings, a common-law lien, or a

statutory lien.

(j) "Organization" means a person other than an individual.

(k) "Person" means an individual, estate, partnership, association,

trust, business or nonprofit entity, public corporation, government or

governmental subdivision, agency or instrumentality, or other legal or

commercial entity.

(l) "Property" means anything that may be the subject of ownership.

(m) "Record" means information that is inscribed on a tangible medium

or that is stored in an electronic or other medium and is retrievable in

perceivable form.

(n) "Relative" means an individual related by consanguinity within the

third degree as determined by the common law, a spouse or an individual

related to a spouse within the third degree as so determined, and

includes an individual in an adoptive relationship within the third

degree.

(o) "Sign" means, with present intent to authenticate or adopt a

record:

(i) to execute or adopt a tangible symbol; or

(ii) to attach to or logically associate with the record an electronic

symbol, sound, or process.

(p) "Transfer" means every mode, direct or indirect, absolute or

conditional, voluntary or involuntary, of disposing of or parting with

an asset or an interest in an asset, and includes payment of money,

release, lease, license, and creation of a lien or other encumbrance.

(q) "Valid lien" means a lien that is effective against the holder of

a judicial lien subsequently obtained by legal or equitable process or

proceedings.

Insolvency. (a) A debtor is insolvent if, at a fair valuation,

the sum of the debtor's debts is greater than the sum of the debtor's

assets.

(b) A debtor that is generally not paying the debtor's debts as they

become due other than as a result of a bona fide dispute is presumed to

be insolvent. The presumption imposes on the party against which the

presumption is directed the burden of proving that the nonexistence of

insolvency is more probable than its existence.

(c) Assets under this section do not include property that has been

transferred, concealed or removed with intent to hinder, delay or

defraud creditors, or that has been transferred in a manner making the

transfer voidable under this article.

(d) Debts under this section do not include an obligation to the

extent it is secured by a valid lien on property of the debtor not

included as an asset.

Value. (a) Value is given for a transfer or an obligation if,

in exchange for the transfer or obligation, property is transferred or

an antecedent debt is secured or satisfied, but value does not include

an unperformed promise made otherwise than in the ordinary course of the

promisor's business to furnish support to the debtor or another person.

(b) For the purposes of paragraph two of subdivision (a) of section

two hundred seventy-three and section two hundred seventy-four of this

article, a person gives a reasonably equivalent value if the person

acquires an interest of the debtor in an asset pursuant to a regularly

conducted, noncollusive foreclosure sale or execution of a power of sale

for the acquisition or disposition of the interest of the debtor upon

default under a mortgage, deed of trust, or security agreement.

(c) A transfer is made for present value if the exchange between the

debtor and the transferee is intended by them to be contemporaneous and

is in fact substantially contemporaneous.

Transfer or obligation voidable as to present or future

creditor. (a) A transfer made or obligation incurred by a debtor is

voidable as to a creditor, whether the creditor's claim arose before or

after the transfer was made or the obligation was incurred, if the

debtor made the transfer or incurred the obligation:

(1) with actual intent to hinder, delay or defraud any creditor of the

debtor; or

(2) without receiving a reasonably equivalent value in exchange for

the transfer or obligation, and the debtor:

(i) was engaged or was about to engage in a business or a transaction

for which the remaining assets of the debtor were unreasonably small in

relation to the business or transaction; or

(ii) intended to incur, or believed or reasonably should have believed

that the debtor would incur, debts beyond the debtor's ability to pay as

they became due.

(b) In determining actual intent under paragraph one of subdivision

(a) of this section, consideration may be given, among other factors, to

whether:

(1) the transfer or obligation was to an insider;

(2) the debtor retained possession or control of the property

transferred after the transfer;

(3) the transfer or obligation was disclosed or concealed;

(4) before the transfer was made or obligation was incurred, the

debtor had been sued or threatened with suit;

(5) the transfer was of substantially all the debtor's assets;

(6) the debtor absconded;

(7) the debtor removed or concealed assets;

(8) the value of the consideration received by the debtor was

reasonably equivalent to the value of the asset transferred or the

amount of the obligation incurred;

(9) the debtor was insolvent or became insolvent shortly after the

transfer was made or the obligation was incurred;

(10) the transfer occurred shortly before or shortly after a

substantial debt was incurred; and

(11) the debtor transferred the essential assets of the business to a

lienor that transferred the assets to an insider of the debtor.

(c) A creditor making a claim for relief under subdivision (a) of this

section has the burden of proving the elements of the claim for relief

by a preponderance of the evidence.

* § 273-a. Conveyances by defendants. Every conveyance made without

fair consideration when the person making it is a defendant in an action

for money damages or a judgment in such an action has been docketed

against him, is fraudulent as to the plaintiff in that action without

regard to the actual intent of the defendant if, after final judgment

for the plaintiff, the defendant fails to satisfy the judgment.

* NB Repealed April 4, 2020

Transfer or obligation voidable as to present creditor. (a) A

transfer made or obligation incurred by a debtor is voidable as to a

creditor whose claim arose before the transfer was made or the

obligation was incurred if the debtor made the transfer or incurred the

obligation without receiving a reasonably equivalent value in exchange

for the transfer or obligation and the debtor was insolvent at that time

or the debtor became insolvent as a result of the transfer or

obligation.

(b) A transfer made by a debtor is voidable as to a creditor whose

claim arose before the transfer was made if the transfer was made to an

insider for an antecedent debt, the debtor was insolvent at that time,

and the insider had reasonable cause to believe that the debtor was

insolvent.

(c) Subject to subdivision (b) of section two hundred seventy-one of

this article, a creditor making a claim for relief under subdivision (a)

or (b) of this section has the burden of proving the elements of the

claim for relief by a preponderance of the evidence.

When transfer is made or obligation is incurred. For the

purposes of this article:

(a) a transfer is made:

(1) with respect to an asset that is real property other than a

fixture, but including the interest of a seller or purchaser under a

contract for the sale of the asset, when the transfer is so far

perfected that a good-faith purchaser of the asset from the debtor

against which applicable law permits the transfer to be perfected cannot

acquire an interest in the asset that is superior to the interest of the

transferee; and

(2) with respect to an asset that is not real property or that is a

fixture, when the transfer is so far perfected that a creditor on a

simple contract cannot acquire a judicial lien otherwise than under this

article that is superior to the interest of the transferee;

(b) if applicable law permits the transfer to be perfected as provided

in subdivision (a) of this section and the transfer is not so perfected

before the commencement of an action for relief under this article, the

transfer is deemed made immediately before the commencement of the

action;

(c) if applicable law does not permit the transfer to be perfected as

provided in subdivision (a) of this section, the transfer is made when

it becomes effective between the debtor and the transferee;

(d) a transfer is not made until the debtor has acquired rights in the

asset transferred; and

(e) an obligation is incurred:

(1) if oral, when it becomes effective between the parties; or

(2) if evidenced by a record, when the record signed by the obligor is

delivered to or for the benefit of the obligee.

Remedies of creditor. (a) In an action for relief against a

transfer or obligation under this article, a creditor, subject to the

limitations in section two hundred seventy-seven of this article, may

obtain:

(1) avoidance of the transfer or obligation to the extent necessary to

satisfy the creditor's claim;

(2) an attachment or other provisional remedy against the asset

transferred or other property of the transferee if available under

applicable law; and

(3) subject to applicable principles of equity and in accordance with

applicable rules of civil procedure:

(i) an injunction against further disposition by the debtor or a

transferee, or both, of the asset transferred or of other property;

(ii) appointment of a receiver to take charge of the asset transferred

or of other property of the transferee; or

(iii) any other relief the circumstances may require.

(b) If a creditor has obtained a judgment on a claim against the

debtor, the creditor, if the court so orders, may levy execution on the

asset transferred or its proceeds.

Attorney's fees in action or special proceeding under this

article to avoid a transfer or obligation. In an action or special

proceeding under this article in which a judgment creditor who has been

awarded by court order or agreement or has waived attorney's fees

available to prevailing parties by the terms of the statute under which

the creditor's underlying claim arose, or representative asserting the

rights of such judgment creditor, recovers judgment avoiding any

transfer or obligation, the justice or surrogate presiding at the trial

shall fix the reasonable attorney's fees of the creditor, or creditor

representative, incurred in such action or special proceeding under this

article as an additional amount required to satisfy the creditor's

claim, and the creditor, or creditor representative, shall have judgment

therefor against the debtor and, subject to the defenses and protections

in section two hundred seventy-seven of this article, against any

transferee (or person for whose benefit the transfer was made) against

whom relief is ordered, in addition to the other relief granted by the

judgment. The fee so fixed shall be without regard, or prejudice, to any

agreement, express or implied, between the creditor, or the creditor

representative, and his or her attorney with respect to the compensation

of such attorney.

Defenses, liability, and protection of transferee or obligee.

(a) A transfer or obligation is not voidable under paragraph one of

subdivision (a) of section two hundred seventy-three of this article

against a person that took in good faith and for a reasonably equivalent

value given the debtor or against any subsequent transferee or obligee.

(b) To the extent a transfer is avoidable in an action by a creditor

under paragraph one of subdivision (a) of section two hundred

seventy-six of this article the following rules apply:

(1) Except as otherwise provided in this section, the creditor may

recover judgment for the value of the asset transferred, as adjusted

under subdivision (c) of this section, or the amount necessary to

satisfy the creditor's claim, whichever is less. The judgment may be

entered against:

(i) the first transferee of the asset or the person for whose benefit

the transfer was made; or

(ii) an immediate or mediate transferee of the first transferee, other

than:

(A) a good-faith transferee that took for value; or

(B) an immediate or mediate good-faith transferee of a person

described in clause (A) of this subparagraph.

(2) Recovery pursuant to paragraph one of subdivision (a) or

subdivision (b) of section two hundred seventy-six of this article of or

from the asset transferred or its proceeds, by levy or otherwise, is

available only against a person described in subparagraph (i) or (ii) of

paragraph one of this subdivision.

(c) If the judgment under subdivision (b) of this section is based

upon the value of the asset transferred, the judgment must be for an

amount equal to the value of the asset at the time of the transfer,

subject to adjustment as the equities may require.

(d) Notwithstanding voidability of a transfer or an obligation under

this article, a good-faith transferee or obligee is entitled, to the

extent of the value given the debtor for the transfer or obligation, to:

(1) a lien on or a right to retain an interest in the asset

transferred;

(2) enforcement of an obligation incurred; or

(3) a reduction in the amount of the liability on the judgment.

(e) A transfer is not voidable under paragraph two of subdivision (a)

of section two hundred seventy-three or section two hundred seventy-four

of this article if the transfer results from:

(1) termination of a lease upon default by the debtor when the

termination is pursuant to the lease and applicable law; or

(2) enforcement of a security interest in compliance with article nine

of the uniform commercial code, other than acceptance of collateral in

full or partial satisfaction of the obligation it secures.

(f) A transfer is not voidable under subdivision (b) of section two

hundred seventy-four of this article:

(1) to the extent the insider gave new value to or for the benefit of

the debtor after the transfer was made, except to the extent the new

value was secured by a valid lien;

(2) if made in the ordinary course of business or financial affairs of

the debtor and the insider; or

(3) if made pursuant to a good-faith effort to rehabilitate the debtor

and the transfer secured present value given for that purpose as well as

an antecedent debt of the debtor.

(g) The following rules determine the burden of proving matters

referred to in this section:

(1) A party that seeks to invoke subdivision (a), (d), (e) or (f) of

this section has the burden of proving the applicability of that

subdivision.

(2) Except as otherwise provided in paragraphs three and four of this

subdivision, the creditor has the burden of proving each applicable

element of subdivision (b) or (c) of this section.

(3) The transferee has the burden of proving the applicability to the

transferee of clause (A) or (B) of subparagraph (ii) of paragraph one of

subdivision (b) of this section.

(4) A party that seeks adjustment under subdivision (c) of this

section has the burden of proving the adjustment.

(h) The standard of proof required to establish matters referred to in

this section is preponderance of the evidence.

Extinguishment of claim for relief. A claim for relief with

respect to a transfer or obligation under this article is extinguished

unless action is brought:

(a) under paragraph one of subdivision (a) of section two hundred

seventy-three of this article, not later than four years after the

transfer was made or the obligation was incurred or, if later, not later

than one year after the transfer or obligation was or could reasonably

have been discovered by the claimant;

(b) under paragraph two of subdivision (a) of section two hundred

seventy-three or subdivision (a) of section two hundred seventy-four of

this article, not later than four years after the transfer was made or

the obligation was incurred; or

(c) under subdivision (b) of section two hundred seventy-four of this

article, not later than one year after the transfer was made.

Governing law. (a) In this section, the following rules

determine a debtor's location:

(1) A debtor who is an individual is located at the individual's

principal residence.

(2) A debtor that is an organization and has only one place of

business is located at its place of business.

(3) A debtor that is an organization and has more than one place of

business is located at its chief executive office.

(b) A claim for relief in the nature of a claim for relief under this

article is governed by the local law of the jurisdiction in which the

debtor is located when the transfer is made or the obligation is

incurred.

Supplementary provisions. Unless displaced by the provisions of

this article, the principles of law and equity, including the law

merchant and the law relating to principal and agent, estoppel, laches,

fraud, misrepresentation, duress, coercion, mistake, insolvency, or

other validating or invalidating cause, supplement its provisions.

Uniformity of application and construction. This article shall

be applied and construed to effectuate its general purpose to make

uniform the law with respect to the subject of this article among states

enacting it.

Relation to electronic signatures in global and national

commerce act. This article modifies, limits, or supersedes the

Electronic Signatures in Global and National Commerce Act, 15 U.S.C.

Section 7001 et seq., but does not modify, limit, or supersede Section

101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic

delivery of any of the notices described in Section 103(b) of that act,

15 U.S.C. Section 7003(b).

Permissible exemptions in bankruptcy. Under section five

hundred twenty-two of title eleven of the United States Code, entitled

"Bankruptcy", an individual debtor domiciled in this state may exempt

from the property of the estate, to the extent permitted by subsection

(b) thereof, only (i) personal and real property exempt from application

to the satisfaction of money judgments under sections fifty-two hundred

five and fifty-two hundred six of the civil practice law and rules, (ii)

insurance policies and annuity contracts and the proceeds and avails

thereof as provided in section three thousand two hundred twelve of the

insurance law and (iii) the following property:

1. Bankruptcy exemption of a motor vehicle. One motor vehicle not

exceeding four thousand dollars in value above liens and encumbrances of

the debtor; provided, however, if such vehicle has been equipped for use

by a disabled debtor, then ten thousand dollars in value above liens and

encumbrances of the debtor.

2. Bankruptcy exemption for right to receive benefits. The debtor's

right to receive or the debtor's interest in: (a) a social security

benefit, unemployment compensation or a local public assistance benefit;

(b) a veterans' benefit; (c) a disability, illness, or unemployment

benefit; (d) alimony, support, or separate maintenance, to the extent

reasonably necessary for the support of the debtor and any dependent of

the debtor; (e) the debtor's interest in his or her rent-stabilized

lease; and (f) all payments under a stock bonus, pension, profit

sharing, or similar plan or contract on account of illness, disability,

death, age, or length of service unless (i) such plan or contract,

except those qualified under section 401, 408 or 408A of the United

States Internal Revenue Code of 1986, as amended, was established by the

debtor or under the auspices of an insider that employed the debtor at

the time the debtor's rights under such plan or contract arose, (ii)

such plan is on account of age or length of service, and (iii) such plan

or contract does not qualify under section four hundred one (a), four

hundred three (a), four hundred three (b), four hundred eight, four

hundred eight A, four hundred nine or four hundred fifty-seven of the

Internal Revenue Code of nineteen hundred eighty-six, as amended.

3. Bankruptcy exemption for right to receive certain property. The

debtor's right to receive, or property that is traceable to: (i) an

award under a crime victim's reparation law; (ii) a payment on account

of the wrongful death of an individual of whom the debtor was a

dependent to the extent reasonably necessary for the support of the

debtor and any dependent of the debtor; (iii) a payment, not to exceed

seventy-five hundred dollars on account of personal bodily injury, not

including pain and suffering or compensation for actual pecuniary loss,

of the debtor or an individual of whom the debtor is a dependent; and

(iv) a payment in compensation of loss of future earnings of the debtor

or an individual of whom the debtor is or was a dependent, to the extent

reasonably necessary for the support of the debtor and any dependent of

the debtor.

Aggregate individual bankruptcy exemption for certain annuities

and personal property. 1. General application. The aggregate amount the

debtor may exempt from the property of the estate for personal property

exempt from application to the satisfaction of a money judgment under

subdivision (a) of section fifty-two hundred five of the civil practice

law and rules and for benefits, rights, privileges, and options of

annuity contracts described in the following sentence shall not exceed

ten thousand dollars. Annuity contracts subject to the foregoing

limitation are those that are: (a) initially purchased by the debtor

within six months of the debtor's filing a petition in bankruptcy, (b)

not described in any paragraph of section eight hundred five (d) of the

Internal Revenue Code of nineteen hundred fifty-four, and (c) not

purchased by application of proceeds under settlement options of annuity

contracts purchased more than six months before the debtor's filing a

petition in bankruptcy or under settlement options of life insurance

policies.

2. Contingent alternative bankruptcy exemption. Notwithstanding

section two hundred eighty-two of this article, a debtor, who (a) does

not elect, claim, or otherwise avail himself of an exemption described

in section fifty-two hundred six of the civil practice law and rules;

(b) utilizes to the fullest extent permitted by law as applied to said

debtor's property, the exemptions referred to in subdivision one of this

section which are subject to the ten thousand dollar aggregate limit;

and (c) does not reach such aggregate limit, may exempt cash in the

amount by which ten thousand dollars exceeds the aggregate of his or her

exemptions referred to in subdivision one of this section or in the

amount of five thousand dollars, whichever amount is less. For purposes

of this subdivision, cash means currency of the United States at face

value, savings bonds of the United States at face value, the right to

receive a refund of federal, state and local income taxes, and deposit

accounts in any state or federally chartered depository institution.

Exclusivity of exemptions. In accordance with the provisions of

section five hundred twenty-two (b) of title eleven of the United States

Code, debtors domiciled in this state are not authorized to exempt from

the estate property that is specified under subsection (d) of such

section.

Alternative federal exemptions. Notwithstanding any

inconsistent provision of law, an individual debtor may opt to exempt

from property of the estate such property as is permitted to be exempted

pursuant to section five hundred twenty-two of title eleven of the

United States Code in lieu of such property as is permitted to be

exempted pursuant to the applicable provisions of this article.

Laws repealed. Of the laws enumerated in the schedule hereto

annexed, that portion specified in the last column is hereby repealed.

When to take effect. This chapter shall take effect

immediately.