Law Commons^™

Is Bankruptcy The Answer For Troubled Cities And States?, David A. Skeel Jr.

Faculty Scholarship at Penn Carey Law

The financial crisis that has afflicted America’s cities and states for the past decade is far from over. Under existing U.S. law, distressed municipalities can file for bankruptcy if their state permits this, as roughly half do. The states themselves do not have a bankruptcy option, however, no matter how bleak their circumstances may be. There have recently been dramatic developments in the handling of municipal distress. Several cities have filed for bankruptcy under Chapter 9, which, although adequate for sewer and water districts or a very small town, has conventionally been deemed irrelevant for real cities and municipalities. Additionally, …