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What Is a Chapter 9 Bankruptcy?

Posted by Chris Peterson | Dec 17, 2014 | 0 Comments

What Is a Chapter 9 Bankruptcy?

What Is a Chapter 9 BankruptcyChapter 9 is probably the rarest type of bankruptcy. This is because its purpose is very limited, and individuals are not able to file for this sort of protection. Chapter 9 is designed primarily for what are termed “municipalities,” the definition of which will be seen. If you need to file for bankruptcy protection, it is best that you work with a bankruptcy attorney in College Station.

Definition of Municipalities

Municipalities are defined under the United States Bankruptcy Code as political subdivisions, public agencies, or instrumentalities of the state. While this definition leaves the door open to interpretation, in practice, the kinds of entities that can file Chapter 9 are cities and towns, counties, school districts, municipal utilities, and tax districts.

Purpose of a Chapter 9 Bankruptcy

A Chapter 9 allows an entity as described above that is experiencing insolvency to reorganize their debt through refinancing, reduction in the principal and/or interest of loans, debt consolidation, and extending timelines for repayment. The purpose is not to liquidate. The value of this should be clear. For instance, the City of Detroit has been in a Chapter 9 bankruptcy for some time now. A total liquidation would have meant complete elimination of all governmental associations with the city, such as police, fire, etc. The city would have, in effect, ceased to exist. Instead, Detroit, which in a decade lost over one-fourth of its population, has been able to eliminate some debt and refinance other debt, and they are now seeking approval of the court to exit the bankruptcy.

Requirements for a Chapter 9 Bankruptcy

Prior to filing a Chapter 9, it may be necessary for the municipality to attempt to negotiate with its creditors. After this has proven fruitless, the municipality may then file paperwork with the court. Unlike other types of bankruptcies, wherein a clerk selects a judge for a case randomly, a Chapter 9 requires that the chief judge of the Court of Appeals make the selection. Once the bankruptcy is filed, a stay is imposed upon all creditor activity.

We Can Help if You Need to File Bankruptcy

If you are in need of gaining bankruptcy protection, a Bryan bankruptcy lawyer with our firm can help. Call Peterson Law Group today at 979-703-7014.

About the Author

Chris Peterson

Chris Peterson is the owner of Peterson Law Group. He practices primarily in the areas of wills, trusts and estate planning; probate and trust administration; elder law; and business law. Chris is also the owner of Brazos 1031 Exchange Company.


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