Who Is Eligible to File For Chapter 9 Bankruptcy?
Under Section 109(c) of the Bankruptcy Codes, only municipalities may file for Chapter 9 bankruptcy. The eligibility requirements include the following stipulations:
- The entity must be a municipality.
- The entity must be specifically authorized to file for Chapter 9 under state law.
- The entity must be insolvent.
- The entity must desire to effect a plan to resolve its debts.
- The entity must have obtained the agreement of creditors.
What is the Process of Filing Chapter 9?
Before filing a bankruptcy petition, the state will require the municipality to attempt to negotiate with the creditor or engage in other pre-bankruptcy activities. The municipality may only file for Chapter 9 bankruptcy after meeting the requirements set forth by the state. The municipality will then be required to prepare and file all necessary bankruptcy paperwork with the bankruptcy court’s clerk. The debtor (municipality) must file a repayment plan indicating how they plan to reorganize their debts within the limits of bankruptcy.
During the process of Chapter 9 bankruptcy, the chief judge will choose the judge who will oversee the bankruptcy case. This is because Chapter 9 bankruptcy can get really complicated, and it often involves a number of political elements. Just like other bankruptcy options, an “automatic stay” goes into effect immediately, preventing all debt collection efforts and protecting municipal authorities, officials, and assets. A discharge may be issued after the plan is confirmed.
When Should Chapter 9 Bankruptcy Be Filed?
A municipality may file for Chapter 9 when:
- They need to impose a plan of adjustment without securing the creditors’ consent.
- They need to reject burdensome executory contracts.
- They need to protect municipal assets and halt creditor collection efforts.
Work With Experienced Chapter 9 Bankruptcy
Attorneys in Fayetteville and Fort Smith, Arkansas
Filing for Chapter 9 bankruptcy in Arkansas involves a lot of complexities. Without proper guidance or representation, the process can turn out to be more expensive and time-consuming, causing significant long-term damage to a municipality’s reputation. An experienced Arkansas bankruptcy attorney can offer the detailed guidance needed to help any municipality navigate the bankruptcy proceedings from start to finish.
At the Bond Law Office, our attorneys are dedicated to guiding clients through the Chapter 9 filing process. Our team will review the circumstances surrounding your municipality’s financial situation, help you understand all of your legal options, and determine whether Chapter 9 bankruptcy is the right option for your locality. We will also help you file your forms, develop a feasible repayment plan, and represent you throughout any court proceedings along the way. Through it all, our attorneys will advise you on how to take charge of your finances and do all that we can to help you avoid a potential fiscal crisis. Don’t face these challenges on your own. Call or reach out to our office today to put an experienced bankruptcy legal team on your side.