Bankruptcy and Small Business
3 Pages Posted: 29 Aug 2001
Congress is again attempting to reform federal bankruptcy law by making bankruptcy less favorable for households whose incomes are above the median level. Whatever the merits of that legislation, it would have a negative impact on small business and on U.S. workers who receive their income from such businesses. Among the proposed reforms are limits on the current "fresh start" provision that protects bankrupt individuals' future earnings.
Data show that small business growth is more vigorous when bankruptcy laws offer more protection of entrepreneurs' assets. That suggests that, if "fresh start" reform is adopted, it could dissuade risk-adverse potential entrepreneurs from starting new businesses.
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