The Logic and Limits of Municipal Bankruptcy Law

54 Pages Posted: 15 Aug 2018 Last revised: 20 Jun 2019

See all articles by Vincent S.J. Buccola

Vincent S.J. Buccola

University of Pennsylvania - The Wharton School - Legal Studies & Business Ethics Department

Abstract

Municipal bankruptcy’s recent prominence has stimulated academic interest in the workings of Chapter 9, much of it critical, but no general framework has been developed against which scholars and policymakers can evaluate the law’s performance. This article offers a normative, economic account of municipal bankruptcy and uses that account to assess current law and suggest changes. It contends that bankruptcy’s singular aim should be to preserve spatial economies—the advantages to locating within a municipality’s unique geographic boundaries—where large public debts, by discouraging investment, threaten to dissipate them. Judged with this end in view, it is argued, Chapter 9 is a marked failure. The law’s compass is so narrow that intervention comes, if at all, only when spatial economies are likely to have been squandered and economic dysfunction taken hold. Municipal bankruptcy, as it now exists, serves mainly as an ad hoc and ill-conceived subsidy program. This article outlines changes to the law that could hasten debt relief, while acknowledging potential objections.

Keywords: municipal bankruptcy, chapter 9, bankruptcy, economic analysis of bankruptcy, bankruptcy theory

Suggested Citation

Buccola, Vincent S.J., The Logic and Limits of Municipal Bankruptcy Law. 86 University of Chicago Law Review 817 (2019). Available at SSRN: https://ssrn.com/abstract=3223691

Vincent S.J. Buccola (Contact Author)

University of Pennsylvania - The Wharton School - Legal Studies & Business Ethics Department ( email )

3730 Walnut Street
Suite 600
Philadelphia, PA 19104-6365
United States

HOME PAGE: http://lgst.wharton.upenn.edu/profile/buccola/

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