Central Falls Retirees v. Bondholders: Assessing Fear of Contagion in Chapter 9 Proceedings

37 Pages Posted: 11 May 2014

See all articles by Maria O'Brien

Maria O'Brien

Boston University School of Law

Date Written: May 9, 2014

Abstract

Modern Chapter 9 litigation has been characterized by extraordinary protections for municipal bondholders, and Central Falls is no exception. Although not well understood by politicians, fear of contagion has encouraged the adoption of legal arrangements that have limited the bankruptcy courts’ ability to include bondholders in the cost of restructuring municipal debt. This preference for bondholders (and, by extension, their insurers) has meant increased misery for taxpayers and retirees. Given that all of these actors appear to have been complicit to some degree in the creation and maintenance of the fiscally imprudent conditions that triggered bankruptcy and that evidence of true contagion is modest, it is hard to justify special protections for bondholders.

Keywords: Chapter 9 of the bankruptcy code, municipal bondholders, taxpayers, retirees, municipal bankruptcy, Central Falls, public employee pensions, municipal debt

JEL Classification: K19, K29, K39

Suggested Citation

O'Brien, Maria, Central Falls Retirees v. Bondholders: Assessing Fear of Contagion in Chapter 9 Proceedings (May 9, 2014). Wayne Law Review, Vol. 59, p. 525 (2013), Boston Univ. School of Law, Public Law Research Paper No. 14-21, Available at SSRN: https://ssrn.com/abstract=2435127

Maria O'Brien (Contact Author)

Boston University School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States
617 353-6679 (Phone)

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