Depending upon which pundit you listen to, municipal bankruptcy is either a wave about to break over the country or a dull-edged tool to be used only on rare occasions. Since the original legislative enactment of Chapter 9 in 1934, there have been fewer than 650 cases filed. In comparison, since 1980, there have been more than 22 million Chapter 7 and 449,000 Chapter 11 bankruptcies.
Because of the political sensitivity related to the potential municipal oversight by a federal judge, a Chapter 9 petition can only be filed if the municipality is expressly authorized to do so under state law. Section 109(c)(2) of the Bankruptcy Code provides that a debtor must be “specifically authorized, in its capacity as a municipality or by name, to be a debtor under such chapter by state law, or by a governmental officer or organization empowered by state law to authorize such entity to be a debtor under such chapter.” Permission to file Chapter 9 is a statutory patchwork across the country, with some states providing blanket authorization, while others, like Pennsylvania, utilizing a multitiered approach that is dependent upon the particular type of municipality or “class” a city may fall into.
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.
For questions call 1-877-256-2472 or contact us at [email protected]
