Small Business Bankruptcy: Failure or Reset?

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Researchers from Brigham Young, Harvard, University of Chicago and University of Toronto, partnered with SCORE to survey small business owners’ attitudes toward bankruptcy, and awareness of bankruptcy as a potential tool.

In general, small business owners are unaware of bankruptcy options and protections

Small business owners were asked if they have “a good understanding of the bankruptcy system:”

  • 10% strongly agree.
  • 24% somewhat agree.
  • 21% neither agree, nor disagreed.
  • 20% somewhat disagreed.
  • 24% strongly disagreed.

There is a negative stigma related to bankruptcy:

  • 65% of small business owners agree that it is embarrassing for a business owner to file for bankruptcy.
  • 60% of small business owners agree that friends and family may look down on a business owner who files for bankruptcy.
  • 58% of small business owners agree that employees will be less willing to work for a business that filed for bankruptcy.
  • 54% of small business owners agree that clients will be less willing to buy from a business owner who filed for bankruptcy.

When shown educational videos about bankruptcy opinions generally changed:

  • 74% of small business owners who watched the educational video were able to correctly answer questions about bankruptcy options and benefits; in comparison to 40% of those who received no additional information.
  • 25% of small business owners who watched the educational video disagreed with negative stigma around bankruptcy, in comparison to 17% who received no additional information.
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