The US Chapter 9 procedure: a plea for a useful model for solving excessive indebtedness of municipalities

Master Thesis


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University of Cape Town

This work is dedicated in the first instance to the necessity of insolvency proceedings for municipalities as territorial entities. Therefore, the current debate on insolvency proceedings for states is presented briefly in an introductory overview to introduce the debate that insolvency proceedings for territorial entities has reached all levels of government worldwide. This is followed by examples of historical experience with insolvency scenarios of states and local authorities to show that insolvency scenarios at all levels of government are part of reality, and that a procedural handling is possible, but also necessary. Based on this, the US-Chapter 9 procedure, perhaps the most well-known legal remedy for insolvent cities, and the most globally developed proceeding for municipal insolvencies, is taken closer into view. In the first step, the principles and mechanisms are pointed out. This is followed by a semantic preamble regarding the development of insolvency law and its public perception, a short discussion of the experience with the Chapter 9 process and last, but not least, a presentation of the key advantages of Chapter 9 proceedings. The goal is to convey that the Chapter 9 proceeding may serve as a useful tool and model for other countries to solve excessive indebtness of municipalities. As a result, in particular, the abstract possibilities and objectives of the procedure are considered.

Includes bibliographical references