Small Business and the 2005 Bankruptcy Law: Should Mom & Apple Pie Be Worried?

Abstract:     
Submitted as part of the symposium, "A Bankruptcy Symposium: Shredding the Safety Net" at the Southern Illinois University School of Law, this article explores the 2005 bankruptcy law as it affects small business and small business owners. Although small business is often a political darling of congressional rhetoric, the 2005 law singled out small business and small business owners for harsher treatment than their large corporate counterparts. The article describes the problems with the new definition for small business debtor in the Bankruptcy Code and then continues by examining the increased disclosure requirements expected of small businesses, the expanded grounds for dismissal of a small business bankruptcy case, serial filer rules that apply only to small businesses, lengthy standard form disclosure statements and reorganization plans that small businesses will have to use, and the shorter deadlines for confirmation of a small business's reorganization plan. The article concludes by making some empirically testable predictions about the future of small business bankruptcies and entrepreneurial activity more generally in the wake of the 2005 law.

Keywords: bankruptcy, small business, entrepreneur

JEL Classifications: K29

Accepted Paper Series