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Bankruptcy Reform Act of 1978

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 11 business reorganization. 

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