Hermann von Schullern zu Schrattenhofen · 1892
Schullern examines bankruptcy legislation through the economic damage generated by its procedures. Comparing Austrian, German, Italian, English, and French law, he distinguishes losses already caused by insolvency from additional losses produced by liquidation and distribution. Historical and conceptual analysis supports a diagnosis of harmful legal arrangements and proposals for reform.
The governing question is whether legally correct distribution justifies procedures that destroy wealth or unnecessarily diminish the satisfaction of needs. Schullern begins with the protective rationale of state intervention:
Wenn nun der Staat sich in die privaten Angelegenheiten seiner Bürger einmischt, sie in gewissem Sinne bevormundet, wenn er Rechtssätze aufstellt, so thut er das allerdings in erster Reihe zum Schutze des einen Bürgers.
English translation: When, then, the state interferes in the private affairs of its citizens, places them in a certain sense under tutelage, when it lays down rules of law, it does so, to be sure, in the first instance for the protection of the one citizen.
His argument extends this concern beyond individual rights to the economic consequences of enforcing them. Creditor protection remains important, but cannot exhaust the assessment of bankruptcy law: proceedings must also be judged by the losses they independently create.
Drawing on Menger’s subjective value theory and the analysis of complementary goods associated with Menger and Böhm-Bawerk, Schullern criticizes compulsory realization. Converting assets into money facilitates comparison of claims, but sale proceeds cannot measure everything relinquished. Household possessions may satisfy needs or carry attachments that buyers neither share nor compensate:
Dass übrigens in aller Regel die Concursgüter für den Käufer weniger Wert haben, als für den Schuldner, dürfte klar sein.
English translation: That, moreover, as a rule the bankruptcy assets have less value for the purchaser than for the debtor is presumably clear.
This discrepancy becomes especially consequential when liquidation dismantles productive combinations. A factory’s buildings, machinery, supplies, and associated facilities derive value from coordinated employment. Separate sales can destroy that relationship even where the enterprise was viable and insolvency arose from obligations external to production.
In einem solchen Falle wird ein einem bestimmten Zwecke zugewiesenes Vermögen als solches vernichtet und seine einzelnen Stücke müssen geringere wirtschaftliche Functionen als bisher erfüllen.
English translation: In such a case an estate assigned to a particular purpose is destroyed as such, and its individual pieces must fulfil lesser economic functions than hitherto.
The distinction between redistribution and destruction organizes the broader diagnosis. Ill-timed sales reduce returns; idle assets interrupt production; delayed payments constrain creditors’ consumption and enterprise; proceedings can disable the debtor’s productive activity; administrative expenses diminish the estate. Forced sales may also depress market prices. Yet Schullern distinguishes private disadvantage from collective economic loss: a low price alone does not establish an equivalent destruction of social wealth.
His discussion of distribution offers a qualified defence of secured claims based on acquired rights and the requirements of credit, while advocating easier mortgage access and greater visibility of movable pledges. Wage priorities expose a deeper problem with formally equal treatment. An identical percentage reduction can deprive poorer creditors of necessities while costing richer creditors comparatively unimportant satisfactions. Since claims already belong to creditors’ wealth, incomplete repayment constitutes a loss, not merely a smaller new benefit. Equal nominal reductions need not mean equal sacrifice.
The reforms translate these distinctions into discretionary, economically informed administration. Judges advised by impartial experts should be able to preserve possessions whose value to the debtor greatly exceeds their negligible realization value, retain sound productive combinations, and postpone sales when likely gains justify delay. Viable businesses should continue under supervision where possible, potentially employing a trustworthy debtor as salaried manager and directing surplus earnings to creditors. Speed serves the prevention of loss rather than constituting an unconditional objective.
Schullern also advocates procedural simplification, relief from state fees, and potentially adjustable cost ceilings. English summary proceedings and official receivers supply comparative evidence for reducing expenses, particularly in small estates. Acknowledging limitations in national bankruptcy statistics, he presents directions for reform rather than a complete legislative code.
His most ambitious distributive proposal would replace proportional objective losses among unsecured creditors with subjective sacrifices proportionate to their claims. Income, family circumstances, and related evidence would inform the assessment; income-tax administration supplies an analogy rather than a finished calculation. Financial transparency, safeguards against ruinous sales, and mutual insurance complement this programme. The study makes preservation of productive relationships and mitigation of unequal hardship integral criteria of bankruptcy legislation, challenging the sufficiency of liquidation and nominal equality.
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