Municipality Bankruptcy Lawyers

Chapter 9 Bankruptcy Lawyers

Municipality bankruptcy lawyers are ready and available to help financially distressed municipalities under the protection of bankruptcy law.

Congress enacted the first municipal bankruptcy legislation in 1934 during the Great Depression. In the nearly 70 years since the establishment of a federal mechanism to resolve municipal debts, fewer than 500 municipal governments have filed bankruptcy petitions under Chapter 9. Chapter 9 filings are rare, but involve many millions of dollars in municipal debt.

Chapter 9 was designed to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished by extending the dates on which the debt balances are due, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.

Who qualifies for Chapter 9 bankruptcy?

As the name implies, only a municipality can file for a Chapter 9 municipality bankruptcy. A "municipality" is defined in the Bankruptcy Code as a "political subdivision or public agency or instrumentality of a State." This definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities. In addition to this criterion, a municipality must also meet three other criteria:

1. The municipal entity must be specifically authorized to be a debtor by State law or by a governmental officer or organization empowered by State law to authorize such entity to be a debtor;
   
   
2. The municipality must be "insolvent" in that:
   • the municipality is generally not paying its debts as they become due unless such debts are the subject of a genuine dispute; or
     
     
   • the municipality is unable to pay its debts as they become due.
   
   AND
   
   
3. The municipality must have the desire to implement a plan to adjust such debts and, among other things:
   • Obtained the agreement of the creditors holding a majority of the claims that the municipality intends to be subject to a plan under Chapter 9;
     
     
   • Negotiated in good faith with creditors and has failed to obtain the agreement of creditors holding at least a majority holding a majority of the claims that the municipality intends to be subject to a plan under Chapter 9;
     
     
   • Cannot negotiate with creditors because such negotiation is impracticable; or
     
     
   • Reasonably believes that a creditor may attempt to obtain a preference in which the creditor claims the right to be paid the balance due on existing debt and will not be subject to the municipality’s plan.

If your organization meets these criteria, it may qualify to file for bankruptcy protection under Chapter 9. Contact an experienced and reputable bankruptcy lawyer to find out if Chapter 9 may be an option for you.

Chapter 9 has some similarities as other chapters, but it is significantly different in the respect that there is no in the law for liquidation of municipality assets for the purpose of distributing the proceeds to creditors. To find out if Chapter 9 bankruptcy is best for your municipality, contact a LawInfo Lead Counsel qualified bankruptcy lawyer today.

Are you a municipality that is financially distressed? Are overburdening debts keeping your municipality from being able to function on a day-to-day basis? Get the relief you need. Contact an experienced and reputable bankruptcy lawyer today.