What Municipal Bankruptcy Entails
August 4th, 2010 | 
Author: What Municipal Bankruptcy Entails
Bankruptcy has been defined as the legal procedure of dealing with debt problems of individuals and businesses. Chapter 9 or the municipality bankrupt code provides for the reorganization of municipalities in cases where they are unable to pay their debts as they fall due. This chapter is completely different from the other chapters since it has no provisions for liquidation of the municipality assets. This is due to the fact that dissolution of this entity would violate the Tenth Amendment Rule of the Constitution.
In this case the municipality can either acquire a new loan refinance or extend the maturities of the loans attained. Since the municipal is state owned the court may not play an important role in the bankruptcy proceedings. The only entity liable to file a petition is the municipal itself which is also referred to as instrumentality of the state. To qualify for this category a body must be specifically authorized by the state to be a debtor; they should be insolvent and finally should have a plan on how to pay off debts.
The main purpose of the municipal filing a petition is to have it protected against creditors who may want to harass it over its way of paying debts. The municipal as it files for petition must also attach a copy or list of creditors who have claim of the municipal property. Since this chapter does not provide for liquidation of property it thus becomes secure from other forms of harassment.
To file a petition the institution must make a publication in a newspaper selected by the court which must run for at least once a week for three consecutive weeks before the case commences.
About the writer: Peter Gitundu Researches and Reports on Bankruptcy. For More Information On Municipal Bankruptcy Read More Of His Articles Here MUNICIPAL BANKRUPTCYYou Can Also Add Your Views About Municipal Bankruptcy On His Blog Here MUNICIPAL BANKRUPTCY
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