Faculty Scholarship

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"Many U.S. cities and other municipalities are struggling under crippling financial demands. Buckling under the financial strain, a number of municipalities are considering an option that, just a few short years ago, was almost unheard of—filing for bankruptcy protection. Assuming that eligibility requirements are met, a municipality1 may seek bankruptcy protection under chapter 9 of title 11 of the Bankruptcy Code. Historically, chapter 9 filings have been rare, with typically less than 10 such filings annually.2 In recent months, however, a number of chapter 9 cases have been filed.3 In addition to the rise in the number of chapter 9 filings, the types of municipal entities seeking bankruptcy protection appear to be changing. Traditionally, the most common types of entities seeking chapter 9 protection were special-purpose districts or authorities. More recently, however, at least one county and a number of cities have opted for chapter 9 protection." [excerpt]