NEW BANKRUPTCY LEGISLATION UNDERCUTS SAFETY NET FOR ENTREPRENEURS

June 27, 2005

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New Study Funded by Kauffman Foundation Exposes Errors in Official Government Statistics, Say Researchers from Harvard Law School and University of Nevada, Las Vegas

Co-authored by Elizabeth Warren and Leo Gottlieb

KANSAS CITY, Mo.- New bankruptcy legislation failed to account for hundreds of thousands of entrepreneurs, independent contractors and self employed individuals who traditionally have turned to bankruptcy relief as an important safety net in their effort to recover from a failed undertaking, according to a new research study.

In fact, large numbers of entrepreneurs use the bankruptcy system, despite official government statistics that say their presence in bankruptcy has declined sharply. A result of the faulty data is a skewed picture of the measurement and strength of the nation’s small business economy. The new legislation, according to some experts on entrepreneurship, could also serve to deter would-be entrepreneurs from embarking on risky new business formation.

The study was conducted by professors at Harvard Law School and the University of Nevada, Las Vegas, with support from the Ewing Marion Kauffman Foundation.

According to the research, which appears in the most recent issue of California Law Review, owners of small businesses annually file an estimated 260,000 to 315,000 bankruptcies. Those numbers are about nine times higher than the government’s official data, which lists only about 37,000 business cases.

Full story – Go to Bankruptcy vs. Entrepreneur Study