Chapter 9, Title 11, United States Code is a chapter of the United States Bankruptcy Code, available exclusively to municipalities and assisting them in the restructuring of their debt. On July 18, 2013, Detroit, Michigan became the largest city in the history of the United States to file for Chapter 9 bankruptcy protection. Jefferson County, Alabama, in 2011, and Orange County, California, in 1994, are also notable examples. The term 'municipality' denotes "a political subdivision or public agency or instrumentality of a State," but does not include a state itself.^[1] States are therefore unable to file for bankruptcy even though they have defaulted in their obligations.

Parts of this article (those related to the number of Chapter 9 bankruptcies filed since 2011) need to be updated. (August 2016)

The first municipal bankruptcy legislation was enacted in 1934 during the Great Depression.^[2] Although Congress attempted to draft the legislation so as not to interfere with the sovereign powers of the states guaranteed by the Tenth Amendment to the Constitution, the Supreme Court held the 1934 Act unconstitutional as an improper interference with the sovereignty of the states.^[2] Congress enacted a revised Municipal Bankruptcy Act in 1937, which was upheld by the Supreme Court. The law has been amended several times since 1937.^[2]

From 1937 to 2008 there were fewer than 600 municipal bankruptcies.^[3] As of June 2012, the total was around 640.^[4] In 2012 there were twelve chapter 9 bankruptcies in the United States, and five petitions have been filed in 2013.^[5] Since 2010, 61 petitions have been filed.^[6]

Previous to the creation of Chapter 9 bankruptcy, the only remedy when a municipality was unable to pay its creditors was for the creditors to pursue an action of mandamus, and compel the municipality to raise taxes.^[7] During the Great Depression, this approach proved impossible, so in 1934, the Bankruptcy Act was amended to extend to municipalities.^[8][9] The 1934 Amendment was declared unconstitutional in Ashton v. Cameron County Water District.^[10]

However, a revised act remedying the constitutional deficiencies was passed again by Congress in 1937 and codified as Chapter X of the Bankruptcy Act (later redesignated as Chapter IX).^[11] This revised act was upheld as constitutional by the Supreme Court in United States v. Bekins.^[12]

Chapter 9 was largely unchanged until it was amended in 1976 in response to New York City's financial crisis.^[13] The changes made in 1976 were adopted nearly identically in the modern 1978 Bankruptcy Code as Chapter 9.

In 1988, Chapter 9 was amended by Congress to provide statutory protection from § 552(a) lien stripping provisions to revenue bonds issued by municipalities. This was addressed with the classification of these bonds as "special revenues" under the newly minted § 928(a) and § 922(d) exemption of special revenues from the automatic stay provisions of § 362.^[14]

To prevent overlap with Chapter 11, § 101(41) of the U.S. Bankruptcy Code (11 U.S.C. § 101(41)) defines the term "person" to exclude many "governmental units" as defined in § 101(27), and "municipality" as defined in § 101(40).

This section needs expansion. You can help by adding to it. (April 2009)

While in many ways similar to other forms of bankruptcy reorganization (esp. Chapter 11),^[15] Chapter 9 has a number of unique characteristics. Because municipalities are entities of State governments, the power of the bankruptcy court is limited to some extent by the Tenth Amendment to the United States Constitution.^[16]

Note: Population refers to the population served at the time of the bankruptcy and may not be the same as its current population. Dollar values are as reported at the time and do not reflect current value.

• Community Act 47, Financially Distressed Municipalities Act, Commonwealth of Pennsylvania.
• Super Chapter 9