In the past, filing for Chapter 9 protection was considered a last resort because of the uncertain results for everyone involved, including municipal employees and bondholders. However, during an economic downturn, debt-laden cities and municipalities may find themselves considering the Chapter 9 option.

In order to be eligible for Chapter 9 protection, several factors must be present, including:

  • Must meet the statutory definition of a municipality under the Bankruptcy Code
  • Must have specific state authorization to be a debtor
  • Must be financially insolvent to be a debtor, meaning that the municipality cannot and has not been paying its debts as they come due

While not always politically popular, Act 47 and Chapter 9 can assist in financial recovery and provide a means for putting municipalities on sound financial ground for future generations.

Contact our team at Bernstein-Burkley today at 412-456-8100 to see how we can assist you in Bankruptcy and Restructuring services.