Municipal Bankruptcy State Laws

Federal law allows local governments to seek Chapter 9 bankruptcy protection given a filing is permitted under state law.

States impose a range of restrictions and qualifying criteria for municipalities attempting to file for Chapter 9, with only about half of state laws specifically authorizing municipalities to file. In Oregon, for example, only irrigation and drainage districts can file for bankruptcy. Montana allows for most municipalities to file for Chapter 9 bankruptcy, with the exception of counties.

Other state statutes are without rules governing Chapter 9 filings. Georgia municipalities are explicitly prohibited from seeking bankruptcy protection.

Law firm Chapman and Cutler, LLP, reviewed all state municipal bankruptcy laws, grouping them into categories described below. Click the map to view laws and the number of local governments for each state.

State specifically authorizes Chapter 9 filings
Chapter 9 filing is authorized upon conditions met and further action of state, officials or other entity
Municipalities have limited authorization (click for details)
No Chapter 9 authorization outlined, laws are unclear or filing otherwise prohibited
Source: State policy classifications obtained from "Primer on Municipal Debt Adjustment," Chapman and Cutler LLP. Number of Governments measured in 2012 Census of Governments
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