Skip to main content

Consumer Lending and the Bankruptcy Reform Act of 1978

(PDF PDF icon)

The Bankruptcy Reform Act of 1978, effective October 1, 1979, is the first complete revision of U.S. bankruptcy law since 1898. Since that time, the enormous growth of the consumer credit industry has paralleled that of the number of consumer bankruptcies. The increase in consumer bankruptcies has placed great strain on the bankruptcy court system, while the diversity and number of consumer debt instruments have made the equitable administration of consumer bankruptcy cases more difficult. The equity issue involves not only rehabilitation of consumer debtors and their right to a "fresh start," but also the right of creditors to equitable distribution of a debtor's estate. Apart from important administrative changes in the U.S. bankruptcy code address this equity issue; specifically, they relate to valuation of a debtor's estate and actions creditors can take against debtors.

The Bankruptcy Reform Act of 1978, effective October 1, 1979, is the first complete revision of U.S. bankruptcy law since 1898. Since that time, the enormous growth of the consumer credit industry has paralleled that of the number of consumer bankruptcies. The increase in consumer bankruptcies has placed great strain on the bankruptcy court system, while the diversity and number of consumer debt instruments have made the equitable administration of consumer bankruptcy cases more difficult. The equity issue involves not only rehabilitation of consumer debtors and their right to a "fresh start," but also the right of creditors to equitable distribution of a debtor's estate. Apart from important administrative changes in the U.S. bankruptcy code address this equity issue; specifically, they relate to valuation of a debtor's estate and actions creditors can take against debtors.


Suggested citation: Kowalewski, K.J., 1981. "Consumer Lending and the Bankruptcy Reform Act of 1978," Federal Reserve Bank of Cleveland Economic Commentary, 01.12.1981

Upcoming EventsSEE ALL

  • 06.23.21

    Policy Summit 2021: Pathways to Economic Resilience in Our Communities

    Offering the latest research on and best practices for promoting the economic mobility and resilience of low- and moderate-income individuals, families, and communities.

  • 07.12.21

    Summer Research Coding Camp

    Summer Research Coding Camp is a virtual week-long immersive program for rising high school juniors and seniors. Students will participate in experiential hands-on activities exposing them to real world skills such as data analysis and interpretation while exploring how economists utilize these skills in their careers.

  • 10.07.21

    Inflation: Drivers and Dynamics Conference 2021

    The European Central Bank (ECB) and the Federal Reserve Bank of Cleveland’s Center for Inflation Research will host the Inflation: Drivers and Dynamics Conference 2021, which will be held virtually on October 7–8.

  • 11.17.21

    2021 Financial Stability Conference: Planning for Surprises, Learning from Crises

    The Federal Reserve Bank of Cleveland and the Office of Financial Research will host their annual financial stability conference, Financial Stability: Planning for Surprises, Learning from Crises, which will be held virtually on November 17-19, 2021.