Washington, DC – With small businesses in Rhode Island and across the country struggling in the wake of the recession, U.S. Senator Sheldon Whitehouse (D-RI) has introduced legislation to improve their chances of staying open. Whitehouse’s Small Business Job Preservation Act of 2010 would ensure that small businesses forced to declare bankruptcy have fair opportunities to reorganize and avoid layoffs.
Chapter 11, the process under which big companies reorganize in bankruptcy, is too costly for most family-owned companies and most often leads to a change in ownership.
“Small businesses are the lifeblood of our economy, and we should give them the tools they need to stay afloat, prosper, and keep people working,” said Whitehouse. “My legislation will eliminate some of the unfair barriers for small companies looking to get out of debt.”
The Small Business Job Preservation Act of 2010 will supplement Chapter 11 with an alternative reorganization process appropriately geared toward small, family-owned businesses. This Chapter 11S would allow small business owners to retain ownership, while ensuring fairness for creditors by permitting payments over time. It would also provide for a standing trustee to oversee the reorganization to ensure that all interests are taken into consideration, reduce administrative costs, which can be prohibitively high in Chapter 11, and increase budgetary flexibility by allowing administrative expenses, such as attorneys’ fees, to be paid over time.
A similar process, available only to family farmers and fisherman, helped to end a crisis of family farm failures in the 1980s, and is now in the Bankruptcy Code as Chapter 12.