Bankruptcy Reform Act of 1978--A Before and After Look

GGD-83-54: Published: Jul 20, 1983. Publicly Released: Jul 26, 1983.

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In response to a congressional request, GAO examined personal bankruptcies before and after the Bankruptcy Reform Act of 1978 went into effect. Specifically, the report addressed the personal and financial characteristics of debtors, the relationship between personal bankruptcies and selected social and economic variables, and the potential impact of various modifications to the personal bankruptcy process.

GAO found that, although the act was intended to make the bankruptcy process more efficient, it may have impacted the total number of adjusted bankruptcy filings in fiscal year 1982 by as much as 6 percent. GAO noted that pre- and post-act debtors showed similar personal characteristics, such as employment and occupation. However, post-act debtors reported higher levels of income, assets, and debts than the pre-act debtors. GAO found that inflation and unemployment were two major factors leading to bankruptcy filings. GAO believes that extending the length of repayment plans could benefit debtors by reducing their monthly payments to facilitate the reduction of individual debts. GAO also found that, since current bankruptcy law allows each State to establish its own debt-exemption limits, inconsistencies are often created in repayment methods. GAO believes that repayments could be better guaranteed, and more property could be made available for liquidation and distribution to creditors, if a standard limit were established.

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