Recently in Bankruptcy & Debt Category

As the owner of a small business you are literally the key to the whole company. You provide the inspiration, the final say in business goals, and the raison d'etre.

You might think the most important business strategy is to maximize income or efficiency. But really what's most important is keeping the heart of the business going strong. That means you.

Work burnout is a real risk for small business owners who put more than just their time and money into their companies. If you want your small business to succeed, and of course you do, make sure that work is always a joy and you're excited to come back and do it again every day.

The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") went into effect on March 22, 2009, but Congress exempted business credit cards.

This new consumer protection law changed the game for credit card companies and consumers, as we blogged about in 2009.

So two years into application of the new law, business credit card users remain at risk for many of the dangers Congress targeted with the CARD Act, reports the Pew Charitable Trust.

Consumers no longer risk exposure to two-cycle billing, unilateral APR increases, and certain fees. But since business cards lack these protections, and many business cards are still backed by their holders' personal credit, credit card companies have kept a "back door" open to the old practices.

As if eating out wasn't already expensive enough, U.S. restaurants are now facing the challenge of record-high food prices. A rise in food costs is problematic because consumers are alright watching their money, restaurants have high levels of debt, and profit margins are razor thin.

In just the last year, Fuddruckers, Charlie Brown's Steakhouse  and Uno Chicago Grill Pizza declared bankruptcy, and more are likely to follow, Reuters reports. And with the increase in food prices, 2011 could be even worse, with companies like Sbarro, El Pollo Loco, Perkins & Marie Callender's Inc, already on the brink.

For once I'm here with good news. About bankruptcy. And the economy. Yes, seriously.

A pair of recently released studies indicate that small business bankruptcies are declining nationwide. According to Equifax Commercial Information Solutions, bankruptcies declined 11 percent in the third quarter of 2010 alone. That also marked the fifth consecutive quarter that bankruptcies have dropped for small businesses. This signals a remarkable shift from only 18 months ago. For the purposes of the study, small businesses are classified as those with 100 or fewer employees.

"Small businesses are having a tough time. But the numbers are beginning to indicate that some of the stresses may be abating," said Reza Barazesh, senior vice president of Equifax. According to the study, small business bankruptcy filings reached their peak at 37,299 during the second quarter of 2009. They stood at 30,392 during the third quarter of 2010. Equifax analyzed Chapter 7, 11 and 13 bankruptcy filings in addition to business data on 24 million U.S. small businesses.

Blockbuster, once the king of video rentals, is preparing to file for bankruptcy next month. Blockbuster hopes to use time in Chapter 11 to restructure their debt load. The company has nearly $1 billion in debts and hopes to escape leases on over 500 stores.

The Blockbuster bankruptcy comes largely as a result of the company's inability to shift gears into the digital age. Netflix and Redbox made renting movies online and from kiosks faster, easier and cheaper than going to a Blockbuster. Even as the company began offering services similar to Netflix, the Blockbuster bankruptcy became inventible as the company was sinking under its massive debt, reports The Los Angeles Times.

Reuters reports that the number of small and mid-sized businesses who are suffering from a loan delinquency rose in the past six months in the midst of the current business loan credit crisis. According to a survey done by PayNet,  small and medium-sized U.S. businesses seeking to finance in the form of business loan credit showed signs of trouble in November as loans more than six months past due rose for the 22nd consecutive month.

PayNet also found out that the loan delinquency will eventually be a cost that is going to be carried on to the lender. If the cost gets carried to the lender, then that leads to more of a squeeze on business loan credit in general.

If you are one of those small business owners who are having a hard time making payments on your small business loan, you do have options.

California small business owners have it tougher than most small business owners in the country. According to the Los Angeles Times, California small business bankruptcies grew by 81% over the past fiscal year, compared to the previous fiscal year. These percentages were provided by the credit agency Equifax, Inc.

While these numbers may seem depressing, experts warn that numbers may be even higher because most small business owners start their businesses as sole proprietorships and file for personal bankruptcy versus commercial bankruptcy. Lawyers often advise small business owners to file for personal bankruptcy instead of business bankruptcy because the filing process is easier. Ms. Kathleen March, a bankruptcy lawyer in Los Angeles said that many small business owners go out of business only to discover that their company's debts continue to haunt them.

Ms. March told the Los Angeles Times: "The norm is if you're running a small business, you will have to either cosign or personally guarantee the significant debts. The business itself can shut down, but the people cosigned all the debts. So, the individuals are then saddled with these huge debts."

Another blow to small businesses came in the form of Advanta's bankruptcy filing this week. This news coupled with CIT's bankruptcy means that getting credit lines and loans that small businesses need will just get harder and harder.

Advanta is a small business credit card lender. They filed for Chapter 11 bankruptcy this past Sunday CNN reports. Its lending arm called Advanta Bank Corp. was not including in this filing.

News of the Advanta bankruptcy is not surprising. It had stopped giving out new loans earlier this year. It has also seen a very sudden rise in defaults on the loans it had already given out to small businesses. Advanta had listed out its assets as valuing $363 million while its debts are $331 million.  

CIT Group entered bankruptcy this past Sunday. The group provides lending to a large number of mid sized and small businesses.

According to the New York Times: "On Sunday, CIT entered what it called a different kind of bankruptcy, one that will let it reemerge from court protection by the end of the year under the ownership of its creditors, who widely supported the reorganization plan."

CIT argued against bankruptcy this past summer by stating that being forced into Chapter 11 protection would be disastrous to the small business sector.