Ask the nation's experts what the new bankruptcy law means for entrepreneurs, and the verdict is almost unanimous: It's awful. Harvard University law professor Elizabeth Warren calls it "the first legislation in U.S. history that will discriminate directly against small business."
Under the proposed law, small businesses filing for Chapter 11 reorganization will get less time than they now have to reorganize and face stiffer requirements to demonstrate viability. Filers now get 175 days to get reorganization plans approved. But only 50% of filers meet the deadline. Most others get extensions, something the new legislation will make much more difficult. The likely result: More owners get pushed into liquidation.
So where was the influential small-business lobby when Congress voted last month? Either silent, or supporting the bill. The U.S. Chamber of Commerce says the changes will help small businesses when they are the creditors. The National Federation of Independent Business declined to take a formal position because the bill "dealt with a lot of issues that had nothing to do with small business," says lobbyist Susan M. Eckerly. Yet the NFIB did oppose an amendment by Senator John F. Kerry (D-Mass.) to strike the harsh rules on small-biz debtors. Why? The amendment would have hurt small creditors, Eckerly says.
But many experts say the law mostly aids big creditors, such as banks, while keeping small businesses at the back of the line. A more likely explanation of the lobbyists' action is that small-biz groups, which lean to the political right, have been busy supporting initiatives such as President Bush's tax cuts and regulatory rollbacks--perennial gripes for NFIB's presumably more solvent members. As for other entrepreneurs, there's a lesson: The next time lobbyists claim to speak for you, listen hard to what they're saying. By Janin Friend