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Ashton, Bekins, And Necessity: Why Chapter 9 Is Constitutional, But Not The Only Way For Municipalities To Adjust Their Debts, Aaron Michael Dmiszewicki

University of Miami Business Law Review

The 1930s saw the nation in crisis, steeped in the worst of the Great Depression. In 1936, over 2,000 municipalities, counties, and other governmental units, in 41 of the 48 states, were known to be in default. In response to this crisis, Congress amended the Bankruptcy Act in 1934 and passed the first municipal bankruptcy statute. Shortly thereafter, the Supreme Court struck it down. Undeterred, Congress passed another municipal bankruptcy statute in 1937, which was almost identical to the previously invalidated law. In 1938, the Supreme Court, now stocked with Roosevelt-appointed New Deal sympathizers, upheld the law.

However, the latter …