If you’ve been reading up on bankruptcy here with Seva Call, you may be wondering about the individual “chapters” of bankruptcy that you can file. We’ve explained the basics of Chapter 7 bankruptcy here before, but today we’re going to spend some time explaining another type of bankruptcy, one meant for pretty specific circumstances: the Chapter 9 bankruptcy definition.
Municipality Bankruptcy
Chapter 9 is one of the lesser-known types of bankruptcy, and it’s pretty uniquely specialized. Chapter 9 bankruptcy is specifically designed for municipalities, which means it’s the bankruptcy for towns, counties, cities, and districts. Chapter 9 bankruptcy allows these municipalities to reorganize their debts by refinancing, reducing interest, or simply giving them a little more time to repay. Municipality assets are not liquidated under the Chapter 9 bankruptcy definition.
Who Can File?
Well, obviously, if you’re a homeowner facing foreclosure, Chapter 9 isn’t for you, as only municipalities can file for Chapter 9. According to Bankruptcy Code, a municipality is defined as a “political subdivision” of a state, which is pretty broad. That means that a wide variety of entities can qualify, including school districts, tax districts, and more.
In order to file for Chapter 9, a municipality has to meet certain conditions:
1. It needs to be specifically authorized to file according to state law.
2. The municipality needs to be insolvent and have a desire to adjust its debts.
3. The municipality needs to gain the agreement of the majority of its creditors – or, barring that, at least provide evidence that a reasonable attempt to negotiate was made.
Filing Chapter 9
Before filing Chapter 9 bankruptcy, a municipality needs to meet some requirements for their state. These requirements vary, but many include the aforementioned negotiations with creditors at the very least. Once these conditions have been met, the municipality needs to prepare and deliver all of the relevant paperwork to the clerk of its bankruptcy court, at which point the petition may be accepted or rejected – most rejections happen as a result of not meeting all prerequisites for filing.
Need A Bankruptcy Lawyer?
Do you need to file Chapter 9 bankruptcy, or another chapter? If so, TalkLocal can help you find an attorney to help you prepare. Our free concierge service will connect you with an attorney in your area who will be happy to assist within minutes.
