In a thorough and well-written decision, the U.S. Bankruptcy Court for the Eastern District of Pennsylvania analyzed the eligibility of the city of Chester, In re City of Chester, No. 22-13032 (Bankr. E.D. Pa. Mar 14, 2023) (Chan, U.S.B.J.), to file for protection under Chapter 9 of the Bankruptcy Code. The opinion thoroughly analyzes each of the statutory elements for eligibility—in light of a substantial history/record—to conclude that the city met the requisite eligibility and that its filing was in “good faith.”

After a review of the historic events leading up to the bankruptcy filing (including the state appointment of a receiver and the receiver’s prepetition debt adjustments presented to the Pennsylvania Commonwealth Court) the court focused on the nuanced statutory language applicable to Chapter 9 to determine whether the city was technically eligible to commence the bankruptcy case. Although Section 301(b) of the Bankruptcy Code provides that the commencement of a voluntary case constitutes an order for relief under that chapter, Section 921(c) of the bankruptcy nevertheless requires the court to dismiss the petition if it does not comply with the provisions of the Bankruptcy Code or was not filed in good faith. To proactively address those issues the court established an objections and hearing scheduling order. After taking submissions and conducting an evidentiary hearing, the court issued its analysis.

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