Gatekeepers Gone Wrong: Reforming the Chapter 9 Eligibility Rules

In order to gain access to chapter 9 bankruptcy, municipalities must demonstrate that they meet several eligibility requirements. These requirements were put in place to prevent municipalities from making rash decisions about filing for bankruptcy. Too often, however, these requirements impede municipalities from attaining desperately needed relief. This Article demonstrates that as currently utilized, the chapter 9 eligibility rules overemphasize deterrence and are not rationally connected to the reasons the chapter 9 bankruptcy system was developed. This Article therefore posits that the chapter 9 eligibility requirements should be relaxed. To support this claim, the Article conducts a detailed analysis of the history and theory of chapter 9 to determine the primary reasons for the eligibility rules and the core functions of a municipal bankruptcy solution. It then demonstrates how many of the concerns driving the eligibility rules’ existence are addressed in other chapter 9 mechanisms and proposes sweeping revisions to the eligibility rules to facilitate appropriate access to chapter 9. Specifically, municipalities in fiscal distress should be able to access bankruptcy when they demonstrate a need for the primary types of assistance that bankruptcy can best provide: nonconsensual debt adjustment, elimination of the holdout creditor problem, and breathing space. Through its analysis, this Article brings needed attention to the broader questions of who should have access to bankruptcy and when that access should be granted

Bankruptcy Overload

The bankruptcy system is overloaded. Those who use it, whether debtors or non-debtors, frequently seek to extract more out of a bankruptcy than the process can, practically and legally, provide. The goals and boundaries of bankruptcy law have always been subject to debate, making the system particularly susceptible to taking on more than it can bear. This Article defines and explains the concept of bankruptcy overload, illustrating that many of the problems currently plaguing the bankruptcy system derive from overloading it. In addition, although overloading the system may create problems in individual cases, this Article shows that bankruptcy overload is systemically harmful, and that failure to recognize and address it will undermine the system’s long-term utility. Those seeking changes to bankruptcy law must be aware of the system’s capacity constraints. In addition to defining bankruptcy overload and identifying its harms, the Article illuminates ways to address many of the issues present in bankruptcy today while being cognizant of the effect of changes to bankruptcy law on the system as a whol

Beyond the Bankruptcy Code: A New Statutory Bankruptcy Regime for Tribal Debtors

This outstanding Article by Professor Laura N. Coordes discusses the difficulty tribal debtors experience when dealing with financial distress. This Article reveals how and why the Bankruptcy Code is a poor fit for tribal debtors. Instead, this Article proposes that Congress enact a new statutory regime to provide structured debt relief for tribal entities. This Article analyzes analogous situations in which Congress looked beyond the Bankruptcy Code to provide debt relief when the Bankruptcy Code was unable to do so

Formailzing Chapter 9\u27s Experts

Chapter 9 of the U.S. Bankruptcy Code has many shortcomings. One of the most persistent, yet understudied, problems judges face in chapter 9 is also a problem that exists in other areas of bankruptcy law: the sheer difficulty of applying generalized plan confirmation standards to wildly different, highly specialized entities. In practice, judges have turned to experts—individuals well versed in municipal finance, mediation, and the particular debtor com-munity—to help overcome this problem in chapter 9. These experts often per-form critical roles in a municipal bankruptcy case, including conducting mediations, investigating the municipality’s finances, and even helping to craft the municipality’s plan of debt adjustment. Despite the important roles experts play in bankruptcy, their appointment and selection process receives little attention, and the scope of their role is often ill defined. This Article highlights the concerns that arise due to the lack of proce-dures surrounding experts in municipal bankruptcy. After exploring the bene-fits and pitfalls associated with using experts in chapter 9 and elsewhere, this Article provides detailed guidance for designing formal procedures for select-ing, appointing, and using experts in chapter 9

When Borders Dissolve

Scholars have long sought to apply principles from U.S. bankruptcy law to sovereign debt restructurings. Chapter 9 of the U.S. Bankruptcy Code, used to adjust the debts of municipalities, has been a particular source of inspiration, and several proposals currently exist to adapt chapter 9 to address the challenges of sovereign debt restructuring. The difficulties of applying chapter 9 in practice, however, have demonstrated the limitations of a one-size-fits-all solution to municipal distress. Similarly, attempts to adapt chapter 9 to apply uniformly to a broad range of sovereign states may be ineffective. A recurring problem lies in the fact that bankruptcy principles are focused primarily on debt adjustment, while the problems that sovereign states (and, indeed, municipalities) face combine both financial and political aspects. This Article seeks to encourage scholars to look beyond the municipal bankruptcy comparison and offers a study of the challenges and results that occur when municipalities merge. Studying city-county consolidations offers unique insight into possible techniques to address the fiscal and political problems resulting from significant governmental financial distress. The distinct differences between city-county consolidations and sovereign governments have perhaps obscured the benefits of studying these two areas together. This Article will demonstrate, however, that looking beyond the surface differences can provide valuable insight into new ways to address key fiscal and political challenges faced by government debtors

Reorganizing Healthcare Bankruptcy

Many healthcare providers are experiencing financial distress, and if the predicted wave of healthcare bankruptcies materializes, the entire U.S. economy could suffer. Unfortunately, healthcare providers are part of a growing group of “bankruptcy misfits,” in the sense that bankruptcy does not work for them the way it works for other businesses. This is so for two primary reasons. First, the Bankruptcy Code (“Code”) is insufficiently specific with respect to healthcare debtors. Second, the Code lacks an organizing principle to allow courts to reconcile the competing players and interests in healthcare bankruptcy cases. Previous attempts to address these issues have not succeeded. Notably, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 scattered reforms across the Code, which made bankruptcy more complicated for healthcare debtors. As a result, some have argued that these debtors are better off using bankruptcy alternatives, such as state receiverships, to address their debts. This Article asserts that despite their bankruptcy misfit status, healthcare providers can realize distinct benefits from bankruptcy relief. To be effective, however, this relief must respond to healthcare providers’ unique needs. Creating separate Code subchapters for healthcare business bankruptcies would allow Congress to clarify many aspects of healthcare bankruptcy and enable the development of specific procedures and a distinct organizing principle unique to healthcare provider bankruptcies. Although this proposal contemplates a significant structural change to the Code, this Article explains why this change is warranted as part of the Code’s necessary evolution