bankruptcy laws - Appendix: BankruptcyLaws Bankruptcy is...

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Appendix: Working within the Legal Environment of Business · CHAPTER 4 Bankruptcy Laws Bankruptcy is the legal process by which a person, business, or government I entity unable to meet financial obligations is relieved of those debts by a court. The court divides any assets among creditors, allowing creditors to get at least part of their money and freeing the debtor to begin anew. 24 The U.S. Constitution gives Congress the power to establish bankruptcy laws, and there has been bankruptcy legislation since the 1890s. Two major amendments to the bankruptcy code include the Bankruptcy Amendments and Federal Judgeships Act of 1984 and the Bankruptcy Reform Act of 1994. The 1984 legislation allows a person who is bankrupt to keep part of the equity (ownership) in a house, $1,200 in a car, and some other personal property. The Bankruptcy Reform Act of 1994 amends more than 45 sections of the bankruptcy code and creates reforms that speed up and simplify the process. In 1998 a record 1.44 million Americans filed for bankruptcy; in 1999 the number dropped a bit, to 1.3 million. 25 By contrast, only 172,000 Americans filed for bankruptcy in 1978. The number of bankruptcies began to increase in the late 1980s and grew tremendously in the 1990s. While high-profile bankruptcies such as the Planet Hollywood restaurants and the city of Camden, New Jersey, sometimes dominate the news, over 90 percent of bankruptcy filings each year are by individuals. Bankruptcy attorneys say the increase in filings is due to a lessening of the stigma of bankruptcy, the changing economy, an increase in understanding of bankruptcy law and the protection it offers, increased advertising by bankruptcy attorneys, and the ease with which some consumers can get credit. 26 Bankruptcy can be either voluntary or involuntary. In voluntary bankruptcy cases the debtor applies for bankruptcy, whereas in involuntary bankruptcy
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