Google AI Overview

If the City and County of Denver were to declare bankruptcy, it would not be the first city and county to do so in US history. What happens in a municipal bankruptcy? Chapter 9: Municipal bankruptcies are governed by Chapter 9 of the US Bankruptcy Code, which allows municipalities (including cities, towns, counties, and special districts) to reorganize their debts/ Protection from creditors: Filing for bankruptcy provides protection from creditors while the municipality develops a plan to adjust its debts/ Reorganization: The plan might involve extending debt maturities, reducing the principal or interest owed, or refinancing the debt with new loans/ No Liquidation: Unlike other bankruptcy chapters, Chapter 9 does not allow for the liquidation of municipal assets to pay off creditors/ Limited Court Power: Bankruptcy courts have limited power to intervene in a municipality's operations due to the Tenth Amendment, which reserves sovereignty to the states/... Potential impacts: While essential services like public safety and garbage collection generally continue, there might be reductions in other services, deferred maintenance on infrastructure, and possible tax increases or impacts on borrowing costs in the future... State Role: States often play a role in financially distressed municipalities, sometimes intervening before or during bankruptcy proceedings/ Previous city and county bankruptcies: Several cities and counties have filed for Chapter 9 bankruptcy in the US, including some of the largest such filings: Orange County, California, 1994, Population: 2,500,000, Value: 1.7 billion, Status: Completed, Jefferson County, Alabama County 2011, Population: 658,400, Value: 4 Billion, Status: Completed, Stockton, California City 2012, Population: 291,700, Status: Completed

San Bernardino, California

City

2012

209,900

1 Billion

Completed

Detroit, Michigan

City

2013

700,000

18 Billion

Completed, under investigation

Note: While a bankruptcy filing provides a city with breathing room from creditors and the opportunity to restructure its finances, it can have long-term effects on its credit rating, future borrowing costs, and resident services.