Business Opportunities Weblog

May 3, 2005 by Dane Carlson | 1 Comment

Fortune Small Business:

The new law will also make it easier for small-business owners to collect debt from individualsFort who file for bankruptcy protection. Under the new law, many consumers will no longer be eligible to file for Chapter 7. Instead, they will have to file for Chapter 13, agreeing to a payment plan to pay back their creditors over a five-year period. “The new bill is very creditor friendly,” says Samuel Gerdano, executive director of the American Bankruptcy Institute, a non-partisan research organization in Alexandria, Va. “And small businesses are often creditors.”

But the new law isn’t so friendly toward small-business owners who are debtors. It will be harder for them to reorganize under Chapter 11, work out payment plans with their creditors and stay in business. If a company in Chapter 11 has less than $2 million in debt, then it is subject to the law’s new special small-business provisions. “You’d have additional paperwork and reporting burdens,” Gerdano says. “You’d have to have your books and records examined by the bankruptcy trustee to ensure that the company has a plan to succeed.” If the trustee determines that the business doesn’t have a good chance of surviving, he can move the case from Chapter 11 to Chapter 7. Under Chapter 7, a company’s assets are sold off to pay off creditors.

via Get Out Of Debt Blog.

In Posts | 1 Comment