Chapter 9 Bankruptcy
Southern Utah Chapter 9 Bankruptcy Attorney
Tony Jones is a seasoned bankruptcy attorney here at Ruesch & Reeve PLLC, he has years of experience and has filed thousands of bankruptcy cases in Utah. From effectively providing insight regarding your rights, helping you understand the basics, and protecting your rights through the entire process giving our clients the very best advice and peace of mind during this difficult time.
Is Bankruptcy Right for Me?
Deciding whether to file for bankruptcy and what type of bankruptcy, will depend on your financial circumstances and goals. There are three types of bankruptcy we explore with each client during our initial consultation. Chapter 7 offers a way to discharge and eliminate debt but may require the surrender of some assets. Chapter 13 (for individuals) and Chapter 11 (for businesses) involve the reorganization and repayment of debt under the protection of the bankruptcy court.
Chapter 9 Bankruptcy – Municipal Bankruptcy
Purpose of Municipal Bankruptcy
The purpose of chapter 9 is to provide financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
Although similar to other chapters in some respects, chapter 9 is significantly different in that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors. Such a liquidation or dissolution would undoubtedly violate the Tenth Amendment to the Constitution and the reservation to the states of sovereignty over their internal affairs. Indeed, due to the severe limitations placed upon the power of the bankruptcy court in chapter 9 cases (required by the Tenth Amendment and the Supreme Court’s decisions in cases upholding municipal bankruptcy legislation), the bankruptcy court generally is not as active in managing a municipal bankruptcy case as it is in corporate reorganizations under chapter 11. The functions of the bankruptcy court in chapter 9 cases are generally limited to approving the petition (if the debtor is eligible), confirming a plan of debt adjustment, and ensuring implementation of the plan. As a practical matter, however, the municipality may consent to have the court exercise jurisdiction in many of the traditional areas of court oversight in bankruptcy, in order to obtain the protection of court orders and eliminate the need for multiple forums to decide issues.
Only a “municipality” may file for relief under chapter 9. 11 U.S.C. § 109(c). The term “municipality” is defined in the Bankruptcy Code as a “political subdivision or public agency or instrumentality of a State.” 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities.
Section 109(c) of the Bankruptcy Codes sets forth four additional eligibility requirements for chapter 9:
- the municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor;
- the municipality must be insolvent, as defined in 11 U.S.C. § 101(32)(C);
- the municipality must desire to effect a plan to adjust its debts; and
- the municipality must either:
- obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan in a case under chapter 9;
- negotiate in good faith with creditors and fail to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that the debtor intends to impair under a plan;
- be unable to negotiate with creditors because such negotiation is impracticable; or
- reasonably believe that a creditor may attempt to obtain a preference.
Ruesch & Reeve PLLC can guide you through your bankruptcy options so that you know every advantage and disadvantage of bankruptcy when deciding if bankruptcy is right for you.
Read more about Chapter 7 Bankruptcy
Read more about Chapter 13 Bankruptcy
Read more about Chapter 11 Bankruptcy
Read more about Chapter 15 Bankruptcy