Beyond bankruptcy: Does the US bankruptcy code provide a fresh start to entrepreneurs?

This paper assesses the extent to which the US bankruptcy system is effective in providing small businesses a “fresh start” after a bankruptcy filing. I use data from the 1993, 1998 and 2003 National Survey of Small Business Finances to explore how firms fare after a bankruptcy filing. On the positive side, previously bankrupt firms are not any more burdened than the average small firm by problems relating to profitability, cash flow, health insurance costs, or taxes. Further, the fact that these firms are surviving several years after the filing is itself a testament to the efficient functioning of the US bankruptcy system. It suggests that the bankruptcy system goes a long way toward helping businesses recover after a bankruptcy filing.