A Fighting Chance

five part-time jobs to meet rent, utilities, phone, food, and insurance: The data used in this book were gathered under strict confidentiality requirements typical of human-subjects research protections at American universities. All data analysis was done using anonymous numerical identifiers for the study participants. When referencing individuals, names and specific identifiers have been changed to preserve anonymity. See The Two-Income Trap, 184; The Fragile Middle Class, Appendix 1; As We Forgive Our Debtors, preface, 5, 49. Note that the quotes in the text are from: The Fragile Middle Class, “Sickness,” “Unemployed or Underemployed.”


so that they could restructure and keep going: Businesses may file for Chapter 7 or Chapter 11 bankruptcy. For discussion of the Chapter 7 process, see note, “a chance to start over…” In Chapter 11 bankruptcy, the business may continue to operate, but the debtor must work with his or her creditors to negotiate a bankruptcy plan, which must be approved by a bankruptcy court. If the plan meets certain requirements, such as fairness and priority of creditors, the creditors may vote on the plan. Once the plan is approved, the debtor will continue to operate and abide by the terms of the plan. To the extent that creditors cannot agree to a plan, the court may intervene in order to expedite the process. In a large Chapter 11 case, the shareholders are typically wiped out and the new financiers, perhaps in conjunction with the old creditors, become owners. In the case of a sole proprietorship, the residual ownership of the business may be hotly contested, as the owner struggles to hang on and a single big creditor, typically the bank, attempts to seize all the assets and shut the business down. The burden of bankruptcy generally falls disproportionately on small businesses, because costs are high and many cannot survive the reorganization process without some flexibility with respect to payment schedules. See Elizabeth Warren and Jay Lawrence Westbrook, “The Success of Chapter 11: A Challenge to the Critics,” Michigan Law Review 107 (2009): 603, 638–40; Alan N. Resnick, “The Future of the Doctrine of Necessity and Critical Vendor Payments in Chapter 11 Cases,” Boston College Law Review 47 (2005): 183, 198–203. In addition, recent developments with regard to unsecured creditors have prompted small businesses to pursue liquidation over reorganization. See Ian Mount, “Advisor to Businesses Laments Changes to Bankruptcy Law,” New York Times, February 29, 2012. I have elsewhere argued that we should be, and that Congress in fact was, especially concerned about the effect of bankruptcy law on small and struggling businesses. See Elizabeth Warren and Jay Lawrence Westbrook, “Financial Characteristics of Businesses in Bankruptcy,” American Bankruptcy Law Journal. 73 (1999): 499, 553; Elizabeth Warren, “The Untenable Case for Repeal of Chapter 11,” Yale Law Journal 102 (1992): 437, 468.

the number had more than doubled in the decade since I had started teaching: The number of non-business filings in 1980 was 287,570 as compared to 718,107 in 1990, which corresponds to a 150 percent increase in filings. See Annual Business and Non-business Filings by Year (1980–2012), Table from http://www.abiworld.org/AM/Template.cfm?Section=Non-business_Bankruptcy_Filings1&Template=/TaggedPage/TaggedPageDisplay.cfm&TPLID=60&ContentID=36302.