Bankruptcy Laws In America
Bankruptcy is the legal process by which financially distressed firms and individuals resolve their debts. The bankruptcy process plays a central role in economics, because competition tends to drive inefficient firms out of business, thereby raising the average efficiency level of those remaining. Consumers benefit because the remaining firms produce goods and services at lower costs and sell them at lower prices.
In evaluating how the new consumer bankruptcy laws will change business practices you must be able to differentiate between the types of business there are. You must see the laws impact on entrepreneurship, small business or partnerships, and corporate entities. Depending on the availability of funding, sources of funding, special provisions enact by Congress one can determine; if, when, or how a company could seek protection and a restart through
bankruptcy.
Entrepreneurship
The new laws enacted by Congress main objective was to holding Americans to be more responsible for paying off their consumer debts. However, it may have an unintended consequence: stifling the entrepreneurial spirit in the United States. It's not just debt-burdened consumers who end up in bankruptcy court, snowed under by medical bills and credit card debt, bedeviled by job loss and divorce. Entrepreneurs by the thousands file personal bankruptcy when their businesses go bad.
. Unfortunately, the new bankruptcy law, which goes into effect on Oct. 17, doesn't acknowledge that some individuals rack up debt not because they're irresponsible, profligate spenders, but because they're entrepreneurs, says Westbrook. In fact, business failures are a factor in as many as 17 percent of the 1.6-million consumer bankruptcies filed each year, according to a provocative new study
The changes, which took effect in October, could end up discouraging business formation, since it will be more difficult for the self-employed to wipe out their debts and...
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