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Filing Bankruptcy Is Too Costly for Small Businesses, Experts Claim

Mar 11 2018

Small Businesses Get the Short-End of the Stick

A lawyer from Washington, D.C. explained that while bankruptcy rules for large corporations who have complex financial agreements and expansive operations work well,

they don't work as well for small businesses. He suggested that rules for small businesses should instead be similar the Chapter 13 bankruptcy, which allows some to keep property by being able to repay debt over several years. According to lawyers, it can often cost anywhere from $100,000 to $300,000 to file for bankruptcy protection, and if there's a creditor dispute, it can sometimes cost twice as much.

How Lawmakers Could Help

The panelists made a few suggestions for making bankruptcy easier for small businesses. One suggestion was cutting the amount of information a small business must file during a case. Also suggested was giving owners of small businesses access to a financial professional who could serve as a guide through problems. A more complicated suggestion was to allow small businesses who go through a bankruptcy to keep their businesses if they promise to pay the companies' past debts with future profits. It remains to be seen if lawmakers were persuaded to change how small businesses file for bankruptcy.

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