Bankruptcy Reform Act of 1978

While bankruptcy law in the United States has seen its share of revisions over time, none may be as significant as the Bankruptcy Reform Act of 1978. One of the biggest reforms of the Bankruptcy Reform Act is what it did to the bankruptcy court.

The Bankruptcy Reform Act of 1978 is recognized for enacting many important "firsts" that are critical to bankruptcy petitions today. Of course, going back to the foundation of bankruptcy courts, new bureaus to hear bankruptcy cases would mean new offices and officers would have to be established to populate these courts and make sure the proceedings would run smoothly.

One critical addition made by the Bankruptcy Reform Act to bankruptcy law was to institute the U.S. Trustee Program. As of 1978, only 18 Federal districts were represented by trustees. However, today all districts except those in North Carolina and Alabama (mediated by bankruptcy administrators) employ trustees.

In addition, the Bankruptcy Reform Act of 1978 saw the inclusion of new types of bankruptcy to the Code. For the solace of individual debtors, a personal bankruptcy option was forged from prior policies, encompassing what is now known as Chapter 13 individual debt readjustment. Meanwhile, corporations were afforded a choice apart from liquidation to reconstitute as well, and as a result of the Bankruptcy Reform Act, are protected by Chapter 11business reorganization.

NEXT: Bankruptcy Abuse Prevention and Consumer Protection Act of 2005