You are here

Navigating Chapter 9 of the Bankruptcy Code

Elizabeth C. Wiggins
November 15, 2017

Municipalities facing fiscal crisis often must make difficult choices, attempting to balance their financial obligations with obligations to deliver critical services, such as the provision of public safety, education, and health, as well as water, sewer, and transportation services. The primary objectives of Chapter 9—to provide a breathing spell to, and adjust the debts of, a distressed municipality—are familiar to bankruptcy professionals. The substance and process of Chapter 9, however, differ from other plan chapters under the Bankruptcy Code in meaningful ways. These differences, the unique circumstances of each Chapter 9 case, and the dearth of statutory and case-law guidance—all against Tenth Amendment considerations—can make navigating a Chapter 9 case challenging for all parties, including the judge and the clerk of court.

In June 2016, the Judicial Conference Committee on the Administration of the Bankruptcy System determined that additional resources could help courts handling Chapter 9 cases and asked the Federal Judicial Center to develop this manual. In September 2016, a working group of judges, clerks of court, attorneys, financial professionals, and academics with Chapter 9 experience assembled at the Federal Judicial Center to talk about what information would be most helpful to the courts. This manual pools the knowledge of those Chapter 9 experts to provide a clearer path for all judges and clerks of court in handling large and small Chapter 9 cases that may be filed by a variety of debtors: cities, townships, and counties; medical-related entities, such as county hospitals and authorities; and political subdivisions, such as sanitary and improvement districts, water districts, and off-track betting authorities.

The manual is accompanied by an online repository of Chapter 9 reference materials.