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Small Business Loses Again

posted by Bob Lawless

Why is bankruptcy law the only area where Congress seems to go out of its way to strike out at small business? Hey, I understand that Congress routinely does things that disadvantage small business, but it seems to make laws that are hostile on its face to small business. A bill is sitting on the president's desk that would again do just that.

In October, I wrote about S. 4044, the Religious Liberty and Charitable Donation Clarification Act of 2006. This is another truth-in-advertising violation in the naming of statutes. Who can be against religious liberty and charitable donations? I'll leave the details of how this amendment works to my previous post, but what it's trying to do is make it clear that chapter 13 debtors can make charitable donations at the expense of their creditors. The problem is that by including one thing, Congress is excluding others. The law does not mention the expenses of a business, meaning self-employed chapter 13 debtors who are above their state median income may not be able to deduct the expenses of a business in a chapter 13 plan. That would pretty much leave them out of chapter 13 altogether.

I doubt Congress is deliberately try to harm small business on this one. It is just another example of what can happen when Congress shuts out bankruptcy professionals from the process of drafting the bankruptcy laws. The president almost certainly will sign this bill. It is noncontroversial (although it should be). Maybe someone can get something inserted in the Congressional Record to make it clear this law does not change long-standing rules for self-employed debtors in chapter 13.

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  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

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