86 NATURE OF CAPITAL AND INCOME [Crar. V 
be impossible; but as their debts for death claims are 
for specific sums, they may be forced into liquidation, if 
unable to obtain these sums by remitting dividends or by 
assessments. 
§ 13 
When bankruptey occurs, the claims of creditors are 
settled in one of three ways: through an agreement of 
“composition,” by which the creditor agrees to take 
what he can get and excuse the debtor for the differ- 
ence; through an assignment by the debtor of his assets 
to his creditors; or through foreclosure by the holder of 
some obligation. 
The final result of bankruptcy will be either liquidation, 
by which the business assets are sold and distributed and 
the business wound up; or reorganization, by which the 
business is continued and the liabilities are entirely changed 
in character. In the case of companies with large fixed 
capital, as, for instance, railroads, reorganization is the 
usual result, and the old bondholders often become the 
stockholders, the old stockholders surrendering their rights 
altogether. While this reorganization is being effected, 
the affairs of the company are administered by a receiver 
appointed by the bankruptey court. He calls in all the 
stock and bonds, and issues temporary receiver’s certifi- 
cates. These in turn are exchanged for the new securities 
when ready. However, the bondholder seldom wishes to 
assume his right of control and become a stockholder, and 
is usually offered instead the option of cash or some new 
security similar in kind to that which he- held before, but 
less in amount. He is apt to accept ong of these alterna- 
tives, realizing that to foreclose and take possession is 
likely to be more troublesome, and, in the end, less advan- 
tageous. Thus the losses of the old company are ‘written 
off,” and the reorganized company starts afresh with a clean 
set of books. The change is simply a change in the forms 
of ownership of wealth and in the individual owners.