New Bankruptcy Laws Scare Off Entrepreneurs

Recent reforms in bankruptcy laws, which hold businesses more accountable for debt repayment even in the case of filing for bankruptcy, may significantly impact the entrepreneur community. Faced with less protection, entrepreneurs will be less likely to take risks and will pass up growth opportunities in order to maintain a sounder financial base. Many experts also anticipate that the new bankruptcy reforms will cause a decrease in new, start-up businesses.

According to some experts, the government based its assessments of the impact of bankruptcy reform on small businesses on inaccurate data. Specifically, the government's estimate of the number of small businesses filing bankruptcy in a given year was about nine times lower than the actual cases of small business bankruptcy filed. Why the discrepancy? Changes in classifications have left many small business owners filing on behalf of their businesses to be categorized as individual filers.

Given the new bankruptcy laws, experts advise that entrepreneurs take extra caution before taking growth risks as more than their businesses could be at stake in the case of a financial disaster. This might be discouraging to those whose businesses depend on risk for growth.

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