Municipal Bankruptcy: When Doing Less is Doing Best

C. Scott Pryor


April 11, 2014

88 Amer. Bankr. L.J. 85 (2014)

The bankruptcy process takes as a given the pre-bankruptcy allocation of economic risk. Yet, the Bankruptcy Code permits this risk to be reallocated through the adjustment process so long as that reallocation is "fair and equitable," does not "discriminate unfairly," and is in the "best interests" of creditors. The first two look to bankruptcy law for their definitions; the third derives from state law.

Chapter 9 of the Bankruptcy Code does not resolve any conflicts among these requirements. This uncertain state of affairs generates a powerful incentive among most parties to settle. So long as the court retains the power to dismiss the case and remit the conflicts to the vagaries of state adjudication, Chapter 9 functions to create an institutional game of Chicken driving stakeholders to consensus.

Number of Pages in PDF File: 42

Keywords: bankrutpcy, Chapter 9, fair and equitable, best interests, discriminate unfairly, Stockton, executory contract

JEL Classification: K19, K30, L30, R50, R51

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Date posted: June 11, 2014  

Suggested Citation

Pryor, C. Scott, Municipal Bankruptcy: When Doing Less is Doing Best (April 11, 2014). 88 Amer. Bankr. L.J. 85 (2014). Available at SSRN: https://ssrn.com/abstract=2448021

Contact Information

C. Scott Pryor (Contact Author)
Professor ( email )
225 Hillsborough Street
Raleigh, NC
United States
919.865.4650 (Phone)
HOME PAGE: http://law.campbell.edu/
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