Municipalities

Bernstein-Burkley, P.C., knows that filing for Chapter 9 protection has been considered a last resort because of the uncertain results for everyone involved, including municipal employees and bondholders. However, in the current economic climate, more and more debt-laden cities and municipalities are finding themselves considering the Chapter 9 option.

Act 47 provides fiscally challenged Pennsylvania municipalities essential options for financial recovery. The Act details criteria for identifying distress and sets forth the powers and duties of the Department of Community and Economic Development (“DCED”) in assisting a municipality to improve its distressed status. Under Act 47, the Pennsylvania DCED will review the criteria as it relates the municipality at issue and determine whether to declare a municipality as financially distressed. Once this designation goes into effect, the municipality is eligible for, inter alia, debt restructuring, federal debt adjustment actions, bankruptcy actions and possible consolidations of neighboring municipalities to relieve financial distress.