Navigating Chapter 9 of the 

Bankruptcy Code

Federal Judicial Center

2017

This Federal Judicial Center publication was undertaken in furtherance of the Center’s statutory mission to develop educational materials for the judicial branch. While 

the Center regards the content as responsible and valuable, this publication does not 

reflect policy or recommendations of the Board of the Federal Judicial Center.
first printing
iii

Contents

Preface, vii

I. Introduction, 1

A. Goals for this Manual, 1

B. Some Chapter 9 Basics, 1

C. Structure of the Manual, 2

II. History of Chapter 9, 4

III. Overview of the Chapter 9 Process, 7

A. The Role of the Bankruptcy Code in Chapter 9 Cases, 8

B. The Role of the Chapter 9 Debtor, 12

C. The Role of the Judge, 12

D. The Role of the State, 12

E. Other Major Stakeholders, 13

F. Key Differences Between Chapter 9 and Chapter 11 

Cases, 14

1. Political Aspects of the Case, 14

2. Municipal Accounting, 15

3. Municipal Bonds, 16

4. Restricted Funds and Payment of Expenses, 19

5. Commencement of the Case, 20

6. Oversight of the Case, 20

7. Creditors’ Committees, 21

8. No Trustee, Examiner, or Receiver, 21

9. No Liquidation or Conversion, 21

10. Pension and Labor Issues, 21

11. Plan Process, 23

IV. General Administrative Matters, 23

A. Appointment of the Bankruptcy Judge, 23

B. Potential Resource Issues, 24

1. Dedicated Staff, 24

2. Courtroom Space and Access to the Proceedings, 25

3. Website Issues, 26

4. Teleconferencing or Videoconferencing for Hearings, 26

5. Media Communications, 27

6. Coordination with the District Court, 28

7. Security Issues, 29
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Navigating Chapter 9 of the Bankruptcy Code

8. Claims Agent, 29

9. Noticing Agent, 30

C. Required Notices in Chapter 9 Cases, 30

D. Electronic Filing and Docket Issues, 31

V. The Beginning of the Case, 33

A. Commencement of the Case, 33

B. Order for Relief or Dismissal of the Petition (Including for 

Lack of Good Faith), 33

C. Eligibility Issues, 34

1. Meet the Definition of a Municipality (§ 109(c)(1)), 35

2. Be Specifically Authorized (§ 109(c)(2)), 35

3. Be Insolvent (§ 109(c)(3)), 37

4. Desire to Effect a Plan (§ 109(c)(4)), 38

5. Demonstrate Progress (§ 109(c)(5)), 38

D. Objections to the Petition, 39

E. Standing Issues, 40

F. Other Issues in the Beginning of the Case, 41

1. Understanding Events Leading up to the Filing, 41

2. Understanding the Debtor’s Objectives for the Case, 42

3. Payment of Prepetition Claims, 43

4. Payment of Postpetition Claims and Administrative 

Expenses, 43

5. Identifying Key Stakeholders and Potential Conflicts of 

Interest, 43

6. “First-Day” Orders, 44

G. Retention and Payment of Professionals, 45

H. Potential Tools for Managing the Case, 46

1. Case-Management Orders, 47

2. Scheduling Orders and Status Conferences, 47

3. Discovery Issues and Pretrial Orders, 47

4. Mediation, 48

VI. The Administration of the Case, 50

A. The Automatic Stay, 50

B. The Lack of an Estate, 51

C. The Continued Operation of the Debtor, 51

1. The Debtor as Limited-Purpose Trustee, 51

2. Obtaining Postpetition Credit, 52
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Contents

3. Postpetition Effect of a Security Interest; Special Issues 

with Special Revenue Bonds and Statutory Liens, 52

4. Limitation on Recourse; Special Issues with Special 

Revenue Bonds, 53

5. Sales of Assets, 53

6. Executory Contracts and Unexpired Leases, 54

7. Collective Bargaining Agreements and Retiree Benefits, 

54

8. Pension-Specific Issues, 56

9. Settlements, 57

D. The Chapter 5 Avoiding Powers, 57

E. The Claims Process, 58

1. List of Creditors, 58 

2. Creditors Affected by Adjustment of Assessments, 58

3. Proofs of Claim, 59

4. Claims Bar Date, 59 

5. Notice and Discharge, 59

VII. The End of the Case: Plan Confirmation, Postconfirmation, 

and Dismissal Issues, 60

A. The Plan Proponent, 60

B. The Disclosure Statement, 61

C. Objections to Confirmation, 61

D. The Confirmation Process, 62

1. Classification of Claims, 63

2. Good Faith, 64

3. Not Prohibited by State Law, 65

4. Regulatory or Electoral Approval, 65

5. Best Interests and Feasibility Requirements, 65

6. Cramdown, 67

7. Use of Court-Appointed Experts, 68

E. Implementation and Postconfirmation Issues, 69

1. Scope of Discharge, 69

2. Continuing Jurisdiction of Court and Closing of Case, 

70

3. Postconfirmation Modification of the Plan, 70

4. Revocation of Confirmation Order, 71

5. Application of Equitable Mootness in Appeals, 71

F. Dismissal of the Case, 72
Navigating Chapter 9 of the Bankruptcy Code

vi

VIII. Issues Common in Smaller and Special Purpose Entity 

Cases, 73

A. Resources and Scaling Case to Size of Debtor, 73

B. Importance of Status Conferences and Timelines, 73

C. Issues Specific to State-Owned or State-Controlled Entities 

or Districts, 74

1. Eligibility Issues, 74

2. Authorization, 75

3. Financing Issues, 75

D. Issues Specific to Hospital Bankruptcies, 75

1. Treatment of Patient Information, 76

2. Appointment of a Patient Care Ombudsman, 76

3. Sales of Hospitals in Chapter 9, 77

IX. Issues Common in Larger Cases, 77

A. Logistical Issues, 78

B. Coordination Issues, 80

C. Intercreditor Issues, 80

X. Key Takeaways, 80

Appendix A: Comparison of Chapter 9 and Chapter 11 of the U.S. 

Bankruptcy Code, 83

Appendix B: Chapter 9 Cases Filed During Fiscal Years 

2008–2016, 91
vii

Preface

It is not an easy decision for a municipality to file bankruptcy. The 

ramifications for the municipality itself, and for its citizens, are vast. 

When such a decision to file bankruptcy is made, that filing puts a 

weighty responsibility on the bankruptcy court.

During the past few years, the Judicial Conference Committee 

on the Administration of the Bankruptcy System has watched with 

interest the Chapter 9 cases around the country, as well as the developments in Puerto Rico. We found it to be a complicated arena, with 

many competing concerns and areas with incomplete legislative and 

rule guidance—all against considerations stemming from the reservation of powers to the states under the Tenth Amendment.

In June 2016, the Bankruptcy Administration Committee determined that additional resources could help courts handling Chapter 

9 cases, and so suggested engaging the Federal Judicial Center in the 

development of a manual. I was named project liaison. 

In September 2016, a working group of Chapter 9 experts assembled at the Federal Judicial Center in Washington, D.C., to talk 

about what information would be most helpful to the courts in handling Chapter 9 cases. The working group included judges, clerks of 

court, attorneys, financial experts, and academics.

This manual reflects the sense of that meeting, and the hard 

work that followed that meeting.

The following experts participated and served as consultants on 

the manual: Judge Thomas B. Bennett (Ret.) (Bailey Glasser LLP); 

William A. Brandt, Jr. (Development Specialists, Inc.); James Doak 

(Miller Buckfire); David Dubrow (Arent Fox LLP); Robert M. Fishman (Shaw Fishman); Kristin K. Going (DrinkerBiddle); Katherine 

B. Gullo (Clerk of Court, Bankr. E.D. Mich.); Judge Shon K. Hastings 

(Bankr. D.N.D.); Mark S. Kaufman (King & Spaulding LLP); Richardo I. Kilpatrick (Kilpatrick & Associates, P.C.); Judge Christopher 

M. Klein (Bankr. E.D. Cal.); Martha E. M. Kopacz (Phoenix Management Services); Lawrence A. Larose (Norton Rose Fulbright US 

LLP); Sharon L. Levine (Saul Ewing LLP); Marc A. Levinson (Orrick, Herrington & Sutcliffe LLP); Vincent J. Marriott III (Ballard 

Spahr LLP); Dana McWay (Clerk of Court, Bankr. E.D. Mo.); Claude 

D. Montgomery (Dentons); Judge Neil P. Olack (Bankr. S.D. Miss.); 

Kevyn D. Orr (Jones Day); Judge Elizabeth L. Perris (Ret.) (D. Ore.); 
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Navigating Chapter 9 of the Bankruptcy Code

Judge Gerald E. Rosen (E.D. Mich.); and Judge Alan C. Stout (Bankr. 

W.D. Ky.). 

Additional participants from the Federal Judicial Center were 

Jason A. Cantone, Denise M. Neary, and Elizabeth C. Wiggins. Participants from the Administrative Office of the U.S. Courts were 

Elizabeth Abdelmasieh (Court Services Office); Mathew R. Hindman (Judicial Services Office); Karen Kremer (Legislative Affairs Office); Vanessa A. Lantin (Judicial Services Office); Patricia Levy (Office of the General Counsel); Mary Louise Mitterhoff (Chief, Court 

Services Office); Michele Reed (Chief, Judicial Services Office); and 

Holly Sellers (Legislative Affairs Office). 

Our thanks to the participants are endless.

We also thank others who provided input on the manuscript: 

Judge Frank J. Bailey (Bankr. D. Mass.); Therese Buthod (Clerk of 

Court, Bankr. E.D. Okla.); Judge Arthur Gonzalez (Ret.) (N.Y.U. Law 

School); Prof. Melissa B. Jacoby (U.N.C. School of Law); Matthew 

Loughney (Clerk of Court, Bankr. M.D. Tenn.); Judge Cynthia A. 

Norton (Bankr. W.D. Mo.); Judge Steven W. Rhodes (Ret.) (Bankr. 

E.D. Mich.); Judge Thomas L. Saladino (Bankr. D. Neb.); Susan 

Thurston (Bankruptcy Clerk of Court, D.R.I.); Jed Weintraub (Clerk 

of Court, Bankr. N.D. Tex.); Margaret Williams (Federal Judicial 

Center); and Diane Zech (Clerk of Court, Bankr. D. Neb.).

The Judicial Conference Committee on Federal–State Jurisdiction also supported the effort.

Special acknowledgment is due then-Professor (now Bankruptcy Judge) Michelle Harner. She served as a reporter for the meeting; 

she prepared the first significant draft of this manual; she reconciled 

and synthesized competing views; and she developed the final product. Her substantive expertise as well as her quick and meticulous 

work were the key drivers to keeping this project on task.

Beth Wiggins and Denise Neary of the Federal Judicial Center 

are also due special thanks for their dedication and professionalism. 

They identified the key players who should be involved in this process and assembled an extraordinary group of experts; organized 

the September meeting; helped to process, address, and reconcile 

feedback on the manuscript through innumerable emails and phone 

calls; and kept all aspects of the project on a quick timeline. They also 

developed an online repository of materials that accompanies the 
ix

Preface

manual. And in doing so, they relied on the guidance and good work 

of many Center colleagues.

Throughout the process, all of us involved were heartened by the 

dedication of those working to bring this guide into being. And all in 

one year’s time.

We hope you find this manual useful.

Judge Eduardo C. Robreno

U.S. District Judge, Eastern District of Pennsylvania

Member and Project Liaison 

Judicial Conference Committee on the 

Administration of the Bankruptcy System

1

I. Introduction

Chapter 9 of the U.S. Bankruptcy Code applies to “municipalities,” 

which the Bankruptcy Code defines as a “political subdivision or 

public agency or instrumentality of a State.” 11 U.S.C. § 101(40). 

Chapter 9 is a critically important but relatively untested area of 

bankruptcy law. Its primary objectives of providing a breathing spell 

for, and adjusting the debts of, a distressed municipality are familiar to bankruptcy professionals, but its substance and process differ 

in meaningful ways from other plan chapters under the Bankruptcy 

Code. These differences, the unique circumstances of each Chapter 

9 case, and the dearth of statutory and case-law guidance can make 

navigating a Chapter 9 case somewhat challenging for all parties, including the judge and the clerk of court.

A. Goals for This Manual

This manual strives to provide a clearer path for judges and clerks of 

court handling a Chapter 9 case. The manual outlines the statutory 

requirements and processes that apply in any Chapter 9 case and 

provides examples of relevant cases and resources. It does not provide an exhaustive listing of the applicable case law or commentary.

Readers should recognize that many aspects of Chapter 9 practice are untested or not clearly established by statute or precedent. 

This manual does not attempt to fill those gaps or clarify the law in 

any substantive way. 

The manual cannot resolve, and does not attempt to resolve, the 

open questions that may exist in Chapter 9 practice. It is intended to 

provide useful information to assist judges in developing their own 

answers and approaches to these questions.

The manual aims to sensitize judges and clerks of court to important considerations by identifying key issues and highlighting 

where ambiguity or uncertainty exists and to provide (1) probative 

questions for judges to evaluate as they plan for, and work through, a 

Chapter 9 case, and (2) reference resources, including representative 

case cites and commentary addressing the issues. 

B. Some Chapter 9 Basics

There are only a small number of Chapter 9 cases, and those are not 

concentrated in any one district. Seventy-eight Chapter 9 cases were 
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Navigating Chapter 9 of the Bankruptcy Code

filed during FY 2008 through FY 2016 (see the list of cases in Appendix B). This number includes five reopened cases and six cases that 

appeared to be filed improperly under Chapter 9 by debtors appearing pro se. The 78 cases were filed across 30 different districts and 

involved 44 different judges, including at least one district in which 

municipalities are not authorized by state law to file bankruptcy. 

The varieties of Chapter 9 cases compound the futility of prescribing a single approach to their management. Cities, townships, 

and counties of various sizes filed 15 of the FY 2008 through FY 2016 

Chapter 9 cases, medical-related entities (e.g., county hospitals, hospital authorities, and districts) filed another 18 filed, and a variety of 

political subdivisions (e.g., sanitary and improvement districts, water districts, property owners improvement districts, off-track betting) filed the remaining cases.

It is thus incumbent upon each judge to have a basic understanding of Chapter 9 issues and to be prepared to develop an overarching 

approach to resolving the Chapter 9 issues unique to any case that is 

assigned to him or her. 

C. Structure of Manual

The manual is organized as follows:

• Part II summarizes the history of Chapter 9. This section discusses the constitutional challenges to the original municipal 

bankruptcy laws enacted in 1934 and the structural and constitutional issues analyzed by lower courts in the context of 

Chapter 9.

• Part III presents an overview of the Chapter 9 process, contrasting it with the Chapter 11 process and providing several primers on issues unique to a Chapter 9 case. This section 

includes basic information on matters such as municipal accounting, the municipal bond market, and public pension obligations.

• Part IV identifies several key administrative matters for the 

judge and the clerk of court in a Chapter 9 case. Some of these 

issues can be addressed very early in (or even prior to) the 

Chapter 9 filing; others will permeate the Chapter 9 case.
3

I. Introduction

• Part V explains what transpires after the filing of a Chapter 9 

petition and the appointment of the bankruptcy judge. It focuses not only on the legal steps required at the beginning of 

the case and the eligibility determination, but also on questions, issues, and information the judge may want to consider 

as the case starts down the Chapter 9 path.

• Part VI discusses the administration of the case—i.e., what 

happens after the order for relief but before the plan confirmation process. The kinds of matters that might be brought 

before the judge during this period are more limited than in a 

Chapter 11 case, but issues may still develop and their resolution may affect plan formulation and confirmation.

• Part VII covers the end of a case: it examines the plan, the 

disclosure statement, and the confirmation process. It includes 

information on postconfirmation jurisdiction and implementation issues. It also includes information on modification of 

the plan or, if the debtor is unable to confirm a plan within a 

reasonable time, dismissal of the case.

• Part VIII is devoted to smaller municipal cases and cases involving special purpose entities or instrumentalities of a state. 

Although the general rules and issues discussed in the previous parts of this manual also apply, these cases can present factors and considerations unique to the size of, and stakeholders 

in, these cases.

• Part IX is devoted to larger municipal cases. Although the 

general rules and issues discussed in the previous parts of this 

manual also apply, these cases can present factors and considerations unique to the size of, and stakeholders in, these cases.

• Part X summarizes key takeaway points for judges and clerks 

of court handling Chapter 9 cases.

The manual is accompanied by an online repository of Chapter 

9 reference materials, available on the Federal Judicial Center’s intranet site (http://fjc.dcn) and its Internet site (http://www.fjc.gov). 

The repository contains information about how to access and contribute materials. 
4

Navigating Chapter 9 of the Bankruptcy Code

II. History of Chapter 9

Prior to the 1930s, federal bankruptcy laws did not address municipal bankruptcy. The widespread financial distress associated with 

the Great Depression, however, caused many cities, counties, and 

townships to default on their financial obligations. The insolvency 

powers of the states and, in turn, their municipalities proved inadequate to address these issues, in large part because of the restriction placed on states by the Contract Clause of the U.S. Constitution. 

Specifically, the Contract Clause provides, “No State shall . . . pass 

any . . . Law impairing the Obligation of Contracts . . . .” U.S. Const.

art. I, § 10, cl. 1. Congress is not subject to the Contract Clause, and 

it is granted the power to enact national bankruptcy laws under the 

Bankruptcy Clause. U.S. Const. art. I, § 8, cl. 4. Nevertheless, prior 

to the early 1930s, federal legislation of municipal bankruptcy was 

untested. Municipal bankruptcy legislation also raised potential issues under the Tenth Amendment, which provides, “The powers not 

delegated to the United States by the Constitution, nor prohibited 

by it to the States, are reserved to the States respectively, or to the 

people.” U.S. Const. amend. 10. For a thoughtful review of the constitutional and federalism issues potentially involved in municipal 

bankruptcies, see, e.g., Andrew B. Dawson, Beyond the Great Divide: 

Federalism Concerns in Municipal Insolvency, 32 Harv. L. & Pol. Rev. 

31 (2017); Melissa B. Jacoby, Federalism Form and Function in the 

Detroit Bankruptcy, 33 Yale J. on Reg. 55 (2016); Hon. Thomas B. 

Bennett, Consent: Its Scope, Blips, Blemishes, and a Bekins Extrapolation Too Far (Keynote Address), 37 Campbell L. Rev. 3 (2015).

Congress enacted its first municipal bankruptcy provisions in 

1934, adding Chapter IX to the 1898 Bankruptcy Act. The 1934 legislation contemplated a voluntary bankruptcy filing by a municipality, 

with the contemporaneous filing of a plan of adjustment supported 

by a fixed threshold of certain of the debtor’s creditors. The legislation also set forth confirmation standards for the plan and stated 

that nothing in the legislation should “be construed to limit or impair the power of any State to control, by legislation or otherwise, 

any political subdivision thereof in the exercise of its political or governmental powers, including expenditures therefor, and including 

the power to require the approval by any governmental agency of 

the State of the filing of any petition hereunder and of any plan of 
5

II. History of Chapter 9

readjustment.” Act of May 24, 1934, Pub. L. No. 73-251, § 80(k), 48 

Stat. 798, 802–03.

A group of bondholders successfully challenged the 1934 legislation in Ashton v. Cameron County Water Improvement District No. 1, 

298 U.S. 513 (1936). In Ashton, a majority of the U.S. Supreme Court 

held that the 1934 legislation violated core federalism principles by, 

among other things, impeding state sovereignty and diminishing the 

protections of the Contract Clause. The Court explained:

If obligations of states or their political subdivisions may 

be subjected to the interference here attempted, they 

are no longer free to manage their own affairs; the will 

of Congress prevails over them; although inhibited, the 

right to tax might be less sinister. And really the sovereignty of the state, so often declared necessary to the federal system, does not exist. . . .

The Constitution was careful to provide that ‘no 

State shall . . . pass any . . . Law impairing the Obligation 

of Contracts.’ This she may not do under the form of a 

bankruptcy act or otherwise. . . . Nor do we think she 

can accomplish the same end by granting any permission 

necessary to enable Congress so to do.

Ashton, 298 U.S. at 531 (citations omitted). 

Notably, the dissent in Ashton also focused on the Contract 

Clause. Justice Cardozo explained: “The Constitution prohibits the 

states from passing any law that will impair the obligation of existing 

contracts, and a state insolvency act is of no avail as to obligations 

of the debtor incurred before its passage. . . . Relief must come from 

Congress if it is to come from any one.” Id. at 534 (J. Cardozo, dissenting) (citations omitted). Most commentators view the dissent in 

Ashton as a more practical approach to allowing distressed municipalities an opportunity to restructure their debt obligations while 

respecting core federalism principles. 

In 1937, Congress responded to Ashton by passing legislation 

addressing municipal bankruptcy in a new Chapter X to the 1898 

Bankruptcy Act. The 1937 legislation was similar to the 1934 legislation in several key respects. It permitted only voluntary municipal 

bankruptcy filings; it required the debtor to file a plan of adjustment 

(actually called a “plan of composition” under the 1937 Act) supported by creditors holding at least 51% of the kind of debt affected 
6

Navigating Chapter 9 of the Bankruptcy Code

by the plan; and it provided creditors with notice of, and an opportunity to vote on, the plan of adjustment. In fact, many commentators 

find little, if any, substantive distinctions between the two pieces of 

federal legislation. See, e.g., Clayton P. Gillette & David A. Skeel, Jr., 

Governance Reform and the Judicial Role in Municipal Bankruptcy, 

125 Yale L.J. 1150, 1173–77 (2016). Nevertheless, the Supreme Court 

upheld the 1937 legislation in United States v. Bekins, 304 U.S. 27 

(1938). The Court focused on the long history of compositions under federal bankruptcy law and the consensual nature of the 1937 

legislation. It concluded:

In the instant case we have co-operation to provide a 

remedy for a serious condition in which the States alone 

were unable to afford relief. Improvement districts, such 

as the petitioner, were in distress.... The natural and reasonable remedy through composition of the debts of the 

district was not available under state law by reason of the 

restriction imposed by the Federal Constitution upon the 

impairment of contracts by state legislation. The bankruptcy power is competent to give relief to debtors in 

such a plight and, if there is any obstacle to its exercise in 

the case of the districts organized under state law it lies in 

the right of the State to oppose federal interference. The 

State steps in to remove that obstacle. The State acts in 

aid, and not in derogation, of its sovereign powers.

Bekins, 304 U.S. at 53–54.

Lower courts generally have acknowledged the constitutionality 

of municipal bankruptcy laws since Bekins. See, e.g., In re City of 

Detroit, Mich., 504 B.R. 97 (Bankr. E.D. Mich. 2013); In re Jefferson County, Ala., 474 B.R. 228 (Bankr. N.D. Ala.), aff’d, 2012 WL 

3775758 (N.D. Ala. 2012); In re City of Cent. Falls, R.I., 468 B.R. 

36 (Bankr. D.R.I. 2012); In re City of Harrisburg, Pa., 465 B.R. 744 

(Bankr. M.D. Pa. 2011). The Supreme Court also addressed the general application of Chapter 9 in Puerto Rico v. Franklin California 

Tax-Free Trust, 136 S. Ct. 1938 (2016) (holding that Puerto Rico is a 

state for purposes of § 903 of the Bankruptcy Code and that § 903(1) 

preempts the Puerto Rico Public Corporation Debt Enforcement 

and Recovery Act). The substance of the statute has changed some 

over the years. The statutory location of municipal bankruptcy in the 

federal legislation also has changed. In 1938, the Chandler Act redes-
7

III. Overview of the Chapter 9 Process

ignated it as Chapter IX of the 1898 Bankruptcy Act. Congress then 

revamped municipal bankruptcy laws in 1976 and carried those laws 

forward in the 1978 Code, reenacting them as Chapter 9. For additional discussion of the history of municipal bankruptcy laws, see, 

e.g., Hon. Thomas B. Bennett, Consent: Its Scope, Blips, Blemishes, 

and a Bekins Extrapolation Too Far (Keynote Address), 37 Campbell 

L. Rev. 3 (2015).

III. Overview of the Chapter 9 Process

Chapter 9 incorporates familiar elements of federal bankruptcy law, 

including an automatic stay to provide a breathing spell for the debtor and a plan process to enable the debtor to adjust its debt obligations. As suggested by its history, however, a Chapter 9 case is different in certain key respects from other kinds of bankruptcy cases. 

The primary differences relate to the identity of the debtor and the 

federalism issues discussed at Part II. These differences are perhaps 

most evident in §§ 903 and 904. 

Section 903, Title 11 of the U.S. Code, acknowledges the continued authority of the state over its municipalities (limited only with 

respect to nonconsensual compositions), providing:

This chapter does not limit or impair the power of a State 

to control, by legislation or otherwise, a municipality of 

or in such State in the exercise of the political or governmental powers of such municipality, including expenditures for such exercise, but—

(1) a State law prescribing a method of composition of 

indebtedness of such municipality may not bind any 

creditor that does not consent to such composition; 

and

(2) a judgment entered under such a law may not bind a 

creditor that does not consent to such composition.

11 U.S.C. § 903. Section 904 then limits the powers of the judge, 

explaining:

Notwithstanding any power of the court, unless the debtor consents or the plan so provides, the court may not, 

by any stay, order, or decree, in the case or otherwise, 

interfere with—
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Navigating Chapter 9 of the Bankruptcy Code

(1) any of the political or governmental powers of the 

debtor;

(2) any of the property or revenues of the debtor; or

(3) the debtor’s use or enjoyment of any income-producing property.

11 U.S.C. § 904. Together, §§ 903 and 904 provide general guidance 

about the roles of the state, the debtor, and the judge in any Chapter 

9 case. These sections also inform many of the other issues that arise 

in a Chapter 9 case, a number of which are addressed in this part of 

the manual. The meaning and application of these sections and their 

relationship to other sections of Chapter 9 are subject to various interpretations.

A. The Role of the Bankruptcy Code in Chapter 9 Cases 

It is important to check any assumptions about how a bankruptcy 

case works against the sections of the Bankruptcy Code applicable 

in Chapter 9 cases. For example, a municipal debtor cannot liquidate 

under the Bankruptcy Code. Certain kinds of municipal debt (i.e., 

pledged special revenues) are not subject to the Chapter 9 automatic 

stay (11 U.S.C. § 922(d)) and the automatic stay is expanded to protect certain third parties (11 U.S.C. § 922(a)(1)). Perhaps most notably, Chapters 3 and 5 of the Bankruptcy Code do not apply wholesale 

in the Chapter 9 context. Rather, § 103(f) provides, “[e]xcept as provided in section 901 of this title, only Chapters 1 and 9 of this title 

apply in a case under such chapter 9.” Section 901, in turn, identifies 

specific sections and portions of sections of Chapters 3, 5, and 11 

that apply in Chapter 9 cases. The following charts summarize the 

interplay between the Bankruptcy Code and Chapter 9. 
9

III. Overview of the Chapter 9 Process

This chart shows the key Bankruptcy Code sections incorporated in § 901(a); a complete list is provided at11 U.S.C. § 901(a).

Applicable Chapter 3 Sections Applicable Chapter 5 Sections Applicable Chapter 11 SectionsSection 301(a)–(b), commencement of the case and the order for relief; but see § 921(c)–(d), modifying the timing of the order for relief

Section 501, filing of proofs of claims or interests

Sections 1102–1103, relating to committees

Section 333, appointment of patient care ombudsman

Section 502, allowance of claims or interests

Section 1109, the right to be heard

Section 344, immunity from self-incrimination Section 503, allowance of administrative expenses Section 1111(b), relating to claims and interestsSection 347(b), unclaimed property Section 504, sharing of compensation Sections 1122–1129, either in their entirety or parts thereof, relating to the contents 

of the plan and the plan and confirmation process

Section 349, effect of case dismissal Section 506, determination of secured 

status

Sections 1142(b)–1145, postconfirmation matters

Section 350(b), reopening a case Section 507(a)(2), administrative expense 

priority

Section 351, disposal of patient records Section 509, claims of codebtors

cont’d

Chart 1: Sections of the Bankruptcy Code Applicable in Chapter 9
10

Navigating Chapter 9 of the Bankruptcy Code

Applicable Chapter 3 Sections Applicable Chapter 5 Sections Applicable Chapter 11 SectionsSection 361, adequate protection Section 510, subordinationSection 362, the automatic stay; but see § 922 (which both enlarges and narrows the scope of the stay)

Section 524(a)(1)–(2), the effect of discharge 

Section 364(c)–(f), obtaining credit Sections 544 to 562 (except §§ 549(b), 

554, and 558)

Section 365, executory contracts and unexpired leasesSection 366, utility service

Chart 1: Sections of the Bankruptcy Code Applicable in Chapter 9 (continued)
11

III. Overview of the Chapter 9 Process Chapter 3 Sections Chapter 5 Sections Chapter 11 Sections Sections 327–331, professionals and com- pensation; but see § 943(b)(3), relating to payment of services and expenses Section 521 duties including schedules and statements of affair Section 1104, relating to the appointment of a trustee or examiner Section 341, meeting of creditors Section 541, definition of property of the estate is not applicable in Chapter 9 (defined in § 902(1) as “property of the debtor”) Section 1107, concerning the rights, powers, and duties of the debtor in possession Section 342, notice; but see § 923 Section 1112, relating to conversion or dis- missal; but see § 930 Section 364(a)–(b), obtaining credit Section 1113, relating to the rejection of 

collective bargaining agreements (note: § 365 may apply; see Part VI.C)Section 1114, relating to the payment of insurance benefits to retired employees (note:§ 365 may apply; see Part VI.C)

This chart shows the key Bankruptcy Code sections that are not incorporated in § 901(a). In addition, Chart 2: Sections of the Bankruptcy Code Not Applicable in Chapter 9§ 901(a) incorporates only parts of some key Code sections identified in Chart 1.
12

Navigating Chapter 9 of the Bankruptcy Code

B. The Role of the Chapter 9 Debtor

The debtor in a Chapter 9 case plays a pivotal role in the direction 

and outcome of the case. The prominence of the debtor stems, in 

part, from the constitutional limitations on the role of the judge and 

other parties in the case. These limitations are described at Parts II 

and III.C. The Chapter 9 debtor can continue to use its assets, pay 

its obligations, and manage its affairs with minimal intervention by 

the judge or creditors. As discussed at Part VI.C, the debtor does not 

need court approval for most postpetition decisions. The primary 

action by the debtor that is subject to creditor review and court approval is the debtor’s plan of adjustment, although only the debtor 

may file or modify a plan. In addition, as discussed at Part V.F, the 

debtor may seek court approval or creditor support of various decisions at different points in the Chapter 9 case.

C. The Role of the Judge 

The role of the judge in a Chapter 9 case is different than in other 

bankruptcy cases. As discussed above, § 904 of the Bankruptcy Code 

specifically precludes the judge from interfering with the debtor in 

ways that would be permissible in, for example, a Chapter 11 case. 

The Chapter 9 case also generally proceeds with less oversight from, 

and proceedings before, the judge. These differences stem in large 

part from the reservation of powers to the states under the Tenth 

Amendment and the delicate balance struck by Congress in enacting 

Chapter 9. In general, the judge can decide matters relating to the 

petition, the plan of adjustment, and the implementation of the plan. 

The debtor and creditors also may ask the judge to determine other matters traditionally within the judge’s purview in a bankruptcy 

case, such as the rejection of executory contracts. It is important to 

recognize that different perspectives exist concerning the appropriate role of the judge in a Chapter 9 case, and judges have adopted different approaches to this particular issue. For cases presenting different approaches, see the related documents in the online repository. 

D. The Role of the State

The state may play an important role in a Chapter 9 case, either directly or indirectly. First and foremost, as discussed at Part V.C, a 

state must expressly authorize its municipalities to file a bankruptcy 
13

III. Overview of the Chapter 9 Process

case. Second, “representatives of the state in which the debtor is located may intervene in a chapter 9 case with respect to matters specified by the court.” Fed. R. Bankr. P. 2018(c). Moreover, the state’s support may assist the debtor in developing and confirming a feasible 

plan of adjustment from both a financial and a political perspective. 

Each state and each judge may approach the state’s role in a 

Chapter 9 case differently. Some states may want more involvement 

in the process than others, and judges may perceive the value of state 

involvement differently in different cases. In many cases, the state 

may be an essential component of the legal and political mix in a 

Chapter 9 case. Judges may benefit from considering earlier rather 

than later in the case the role of the state and the value to a collaborative process among the state, the debtor, and other stakeholders. 

For cases presenting different approaches, see the related documents 

in the online repository.

Finally, it is important to remember the prominent role of state 

law in a Chapter 9 case. State and local rules and regulations continue to apply to the debtor and its operations, both postpetition and 

postconfirmation. A comprehensive review of potentially applicable 

state and local rules and regulations is beyond the scope of this manual, but a list of potential resources on these issues is included in the 

online repository.

E. Other Major Stakeholders

A Chapter 9 case involves some stakeholders that also appear in other kinds of bankruptcy cases, including lenders, bondholders, lessors, employees, retirees, trade creditors, and judgment creditors. 

These familiar stakeholders may, however, present differently in a 

Chapter 9 case. For example, municipal bonds are different than private bond issuances in several key respects and may involve a bond 

insurer (see Part III.F). The employees may include those who work 

for the police department, the fire department, and other service 

providers that are critical to the debtor’s operations in very real, but 

less substantially economic ways. Accordingly, as discussed at Part 

III.E, it is important to understand the scope, nature, and interests of 

even common stakeholders early in the Chapter 9 process.

A Chapter 9 case also implicates the interests of others who may 

not otherwise be involved in the bankruptcy process. For example, 

although most Chapter 11 entity debtors have a board of directors 
14

Navigating Chapter 9 of the Bankruptcy Code

or similar governing body, the governance structure of a Chapter 

9 debtor may be very different, and those governing the Chapter 9 

debtor continue to have a prominent role in its operations and in the 

debt adjustment plan process. In addition, the governing body of a 

Chapter 9 debtor likely is an elected body, which introduces different dynamics into the process. A Chapter 9 case also typically has 

a broad and significant impact on individuals living within the jurisdiction of the debtor or who receive services from and pay taxes, 

fees, and other assessments to the debtor. Judges and debtors have 

taken different approaches to the involvement of public citizens in 

the Chapter 9 process. For cases presenting different approaches, see 

the related documents in the online repository. For a discussion of 

parties in interest and standing in Chapter 9 cases, see Part V.E. 

F. Key Differences Between Chapter 9 and Chapter 11 Cases

The preceding sections discuss differences in the application of the 

Bankruptcy Code, the role of the judge, and the major stakeholders 

in Chapter 9 cases. This section briefly summarizes other key differences that relate more to the mechanics and substantive issues that 

may arise in a Chapter 9 case. A table comparing the key differences 

between Chapter 9 and Chapter 11 is included at Appendix A.

1. Political Aspects of the Case

The public nature of a Chapter 9 debtor often affects the dynamics of 

the case, as well as the discourse, negotiations, and ultimate outcome 

in the case. Moreover, elected officials often approach problems from 

a political perspective rather than the business-driven perspective 

that judges see in Chapter 11 cases. Although the judge is not involved in any of the political decisions made by or regarding the 

debtor, those decisions have consequences for the case and for the 

parties appearing before the judge. An understanding of the political process underlying the debtor’s rehabilitation efforts may assist 

the court in resolving issues brought to its attention. Such an understanding also may help the judge identify the parties that need to be 

involved in the process and the appropriate time for their involvement. Again, different judges approach these matters differently, but 

all judges should be sensitive to the political and very public nature 

of the Chapter 9 process.
15

III. Overview of the Chapter 9 Process

2. Municipal Accounting

As in any bankruptcy case, a judge needs to understand the debtor’s 

finances and the contours of the proposed plan of adjustment. As 

such, a judge should recognize at the outset that municipal finance 

is different than that used in the private sector. A comprehensive 

review of municipal finance is beyond the scope of this manual. Nevertheless, the following summarizes certain aspects of municipal finance to try to sensitize judges to potential issues in the Chapter 9 

case. In addition, a list of resources on these issues is in the online 

repository.

• General Guidance. The Governmental Accounting Standards 

Board (GASB) sets the generally accepted accounting principles (GAAP) for governmental entities. However, many accounting methods used for commercial enterprises are nonapplicable or nonexistent in the government accounting world. 

For more information on GASB, see www.gasb.org. Although 

state and local governments are not required to follow GASB 

recommendations, many public entities may have an obligation to follow GAAP under their respective state constitutions, 

regulations, or applicable enabling legislation. Accordingly, 

GASB may guide public entity accounting, but there is much 

more latitude in public sector than there is in the private sector for financial reporting. In addition, state or local law may 

require public entities to present a variety of different kinds of 

financial information—such as budget-to-actual financial information, multiyear financial plans, and capital plan—which 

may be in addition to, or in lieu of, GAAP accounting.

• Basic Presentation of Financial Information. In general, governmental financial information is reported on both a government-wide basis and a fund-specific basis. The concept 

of “funds” is unique to a governmental accounting and generally breaks down into governmental, proprietary, and fiduciary funds. For a description of these kinds of funds, see 

www.gasb.org/cs/ContentServer?pagename=GASB/GASB

Content_C/UsersArticlePage&cid=1176156735732. For a discussion of fund accounting in the context of a Chapter 9 case, 

see In re Jefferson County, Ala., 503 B.R. 849 (Bankr. N.D. Ala. 

2013) (examining the accounting treatment of operating ex-
16

Navigating Chapter 9 of the Bankruptcy Code

penses incurred by municipality). A typical municipality will 

have (1) a general fund that will capture most of the entity’s 

activities and (2) many specialized funds that reflect a variety 

of specialized government activities. General fund reporting is 

often presented on a full accrual basis, with proprietary and fiduciary fund reporting being presented on an accrual or modified accrual basis. Cash basis accounting generally is not used.

• Budgeting. Governments often use different approaches for 

budgeting than they do for financial reporting. An annual 

budget often includes both recurring revenues and expenses 

as well as one-time and capital expenditures. Appropriations, 

which are typically the way in which a budget translates to 

spending, often cover more than the single year in which financial results are reported. Governmental entities often have 

disjointed reporting around budget-to-actual variances and 

cash-flow-to-general-ledger reconciliations, that is much less 

frequent than that seen with commercial enterprises.

• Comprehensive Annual Financial Report. A good source of information on a municipality’s financial health is its comprehensive annual financial report (CAFR). The CAFR has three 

basic components: an introduction, financial data, and statistical data. Although a municipality is not required to prepare 

a CAFR, most do. For additional information on CAFRs, see 

www.gfoa.org/coa. 

Judges need to be sensitive to the variations associated with government accounting as well as the likelihood that financial information will be less timely and more incomplete than what is typical in 

commercial cases.

3. Municipal Bonds

Most governmental entities meet at least some portion of their budgetary needs through the municipal bond market. Governmental 

entities generally can issue bonds only for a public purpose, and 

most municipal bonds are exempt from federal taxation under the 

Internal Revenue Code. Notably, a municipal bond may be exempt 

from federal taxation, but taxable by the state.
17

III. Overview of the Chapter 9 Process

Governmental entities generally issue one or both of two kinds 

of municipal bonds: general obligation bonds and revenue bonds. In 

its simplest form, this dichotomy breaks down as follows: 

• General obligation bonds are typically not secured obligations 

in the traditional sense. There is generally no specific revenue 

stream or other collateral backing a general obligation bond. 

Rather, general obligation bonds are backed by the “full faith 

and credit” of the issuer—e.g., a pledge by the issuer to use 

its ability to tax its citizens to repay the bonds. Notably, there 

are multiple variations of general obligation bonds, including 

UTGOs and LTGOs, described below. Moreover, general obligation bonds may be secured by a revenue source, restricted 

funds, or a statutory lien. The specific terms of any bond issuance depend on, among other things, the indenture language 

and applicable state or local law. 

• Revenue bonds, on the other hand, are generally backed by the 

revenues generated from a specific project or revenue source—

e.g., the revenue generated by a public transit system. Revenue 

bonds may be secured by a pledge of the specified revenues. 

Such bonds, in turn, may be characterized as debt secured by 

a lien on special revenues under § 927. The Bankruptcy Code 

defines the term “special revenues” in § 902(2), and not all revenue bonds necessarily qualify as special revenue bonds or as 

secured obligations. These issues frequently turn on the facts 

of the particular case and the terms of the particular bond issuance. For discussions concerning issues particular to special 

revenue bonds in Chapter 9 cases, see Parts VI.A, VI.C, VI.D, 

and VII.D. In addition or as an alternative to a lien on special 

revenues, some bonds are secured by a statutory lien on certain revenue streams of the municipality (for example, state 

aid). For a discussion concerning issues particular to statutory 

liens in Chapter 9 cases, see Part VI.C.

Municipal bonds may raise a number of issues in a Chapter 9 

case. For example, bondholders have argued that general obligation 

bonds supported by the full faith and credit of the governmental entity and its unlimited ad valorem taxing power (generally called an 

“unlimited tax general obligation bond” or “UTGO”) create a pledge 

by the governmental entity to raise funds to repay the bonds through 
18

Navigating Chapter 9 of the Bankruptcy Code

property taxes. Bondholders, in turn, have asserted a lien in ad valorem taxes raised by the governmental entity under these circumstances. (Note: A governmental entity’s ability to repay obligations from 

ad valorem taxes may be capped or limited by applicable law—generally called a “limited tax general obligation bond” or “LTGO”—

or the bonds may not invoke the governmental entity’s ad valorem

taxing powers. These bonds often are considered differently than 

bonds with an obligation to use unlimited ad valorem taxing powers 

for repayment.) The nature and extent of general obligation bonds 

supported by an unlimited ad valorem taxing power was raised, but 

settled by the parties, in the Detroit Chapter 9 case. Judges need to 

be sensitive to potential issues concerning the secured or unsecured 

status of municipal bonds.

In certain instances, applicable law may require voter approval 

of the issuance of general obligation bonds, but generally no such 

voter approval is required for revenue bonds. A governmental entity also may issue bonds (typically revenue bonds) on behalf of a 

quasi-public, or even private, entity such as a hospital. This kind of 

revenue bond in which the governmental entity (often called the 

“conduit issuer”) serves as a conduit for the quasi-public or private 

entity (often called the “conduit borrower”) must satisfy certain requirements to maintain a tax-exempt status. Also, in most conduit 

issuances, the governmental entity is not directly or indirectly obligated on the bond. For additional information on conduit issuances, 

see, e.g., www.sec.gov/investor/alerts/municipalbondsbulletin.pdf;

www.oregon.gov/treasury/Divisions/DebtManagement/Documents

/OBEC/2%20-%20Financing%20Team%20-%20Municipal%20

Bond%20Specialists.pdf.

Governmental entities are exempt from most federal securities 

laws, including the requirement that the issuer prepare and receive 

the Securities and Exchange Commission’s approval of a prospectus 

for distribution to investors prior to any public sale of bonds. Governmental entities generally produce an official statement in connection 

with bond issuances. As with any entity issuing securities, governmental entities are subject to the antifraud provisions of federal securities laws. Municipal bonds also are subject to rules established by 

the Municipal Securities Rulemaking Board (MSRB), which is not a 

governmental unit, and the enforcement of these rules by the Financial Industry Regulatory Authority (FINRA). In addition, SEC Rule 
19

III. Overview of the Chapter 9 Process

15c2-12 requires certain ongoing disclosures to MSRB regarding municipal bonds. See www.msrb.org/msrb1/pdfs/SECRule15c2-12.pdf.

Historically, private insurance companies insured the principal 

and interest due on municipal bonds. The issuer paid for this insurance, which enhanced the ratings of the bonds and thus lowered the 

interest rate. The insurance policies generally obligate the insurance 

company to cover any missed payments but do not impose an obligation to pay off the bonds upon a missed payment (i.e., the insurance 

cannot be accelerated without the consent of the insurer). Moreover, 

agreements entered into simultaneously with the insurance policies 

generally give the insurance companies control over the remedies 

available upon a default by the issuer, sometimes explicitly including 

any voting rights associated with the claims of the bondholders in a 

Chapter 9 case. This practice applies to many outstanding municipal 

bond issuances, but this trend may change in the future. The number 

of private insurers for the municipal bond market has diminished 

significantly, as many of these insurers encountered financial difficulties of their own. If a municipal bond issuance is insured, the private insurance company may pay the bondholders when the debtor 

defaults, making the insurer the real party in interest in any Chapter 

9 case. This scenario may create interesting subordination issues. 

General obligation and revenue bonds may present unique challenges in a Chapter 9 case. Some of these issues are addressed at Parts 

V.F (potential conflicts involving bondholders), VI.A (discussing the 

automatic stay and special revenue bonds), VI.C (discussing special 

issues with special revenue bonds and statutory liens), VI.D (discussing avoidance actions and special revenue bonds), and VII.D 

(discussing confirmation issues with respect to special revenue 

bonds).

4. Restricted Funds and Payment of Expenses

A municipality may be required by applicable nonbankruptcy law 

to use certain “restricted,” “limited use,” or “enterprise” funds for 

identified purposes. For example, if the municipality assessed a tax 

for the construction of a new project, applicable nonbankruptcy law 

may require that the municipality use those tax revenues only for 

that particular project. Although a municipality may, in certain circumstances, be permitted to use restricted funds in a pooled account 

for other purposes during an accounting period if sufficient revenue 
20

Navigating Chapter 9 of the Bankruptcy Code

is projected in the general obligation or other fund to cover such expenses, these matters are typically dependent on local law and may 

be subject to dispute or uncertainty. There is generally no dispute, 

however, that federal bankruptcy law cannot override any such applicable state or local law or otherwise allow a municipality to use 

restricted funds for unauthorized purposes. See, e.g., In re Sanitary 

& Improvement Dist. No. 7 of Lancaster Cty., Neb., 96 B.R. 967, 972 

(Bankr. D. Neb. 1989) (“The Code does not override state law concerning the use [a Chapter 9] debtor may make of its property.”); In 

re City of San Bernardino, Cal., 499 B.R. 776, 789 (Bankr. C.D. Cal. 

2013). An open issue is how courts should view bondholders’ rights 

in restricted funds for determining the nature of their claims.

5. Commencement of the Case

A Chapter 9 case must be filed by the municipality and must be voluntary. A municipality must meet the statutory elements of § 109(c) 

to be eligible for an order for relief. A Chapter 9 debtor does not file 

the typical schedules of assets and liabilities and statement of financial affairs. Rather, it files only a list of creditors under § 924, and 

any claim listed is deemed a proof of claim under § 501, unless it is 

listed as contingent, disputed, or unliquidated. 11 U.S.C. § 925. Finally, § 923 requires publication of the notice of commencement in 

compliance with that section. Additional information is provided at 

Parts IV.C and V.A.

6. Oversight of the Case

As is the role of the judge, the role of the U.S. trustee or bankruptcy 

administrator (in Alabama and North Carolina) is greatly limited 

so as not to infringe on the powers of the states. The U.S. trustee or 

bankruptcy administrator has no formal oversight role in the case. 

It is, however, responsible for appointing a creditors’ committee or 

other committee in the case. Notably, the U.S. trustee or bankruptcy administrator may not appoint a committee until after the judge 

determines the municipality’s eligibility to be a debtor and enters 

the order for relief. Additional information is provided at Parts III.C 

and V.
21

III. Overview of the Chapter 9 Process

7. Creditors’ Committees

General unsecured creditors’ committees have rarely been formed in 

Chapter 9 cases. A major reason is that the debtor is not obligated to 

pay the fees of the committee. In addition, most creditor groups are 

well organized. Some cases have, however, involved committees. For 

example, retiree committees have been formed in several cases with 

the debtor voluntarily agreeing to pay the fees. 

8. No Trustee, Examiner, or Receiver

As noted at Part III.A, § 1104 is not applicable in Chapter 9 cases.

Accordingly, except in the limited context of avoiding powers discussed at Part VI.D, the judge lacks the authority to appoint a trustee or examiner in a Chapter 9 case. In addition, the judge may not 

appoint a receiver in a Chapter 9 case under §§ 105(b) and 103(f).

9. No Liquidation or Conversion

A Chapter 9 case may not be converted to a case under another 

Chapter of the Bankruptcy Code, and the debtor may not be forced 

to liquidate its assets in the Chapter 9 case. See, e.g., Silver Sage Partners, Ltd. v. City of Desert Hot Springs (In re City of Desert Hot 

Springs), 339 F.3d 782, 789 (9th Cir. 2003) (“Chapter 9 makes no 

provision for conversion of the case to another chapter or for an involuntary liquidation of any of the debtor’s assets.”). See also In re 

City of Detroit, Mich., 504 B.R. 97, 147 (Bankr. E.D. Mich. 2013); In 

re Richmond Unified School Dist., 133 B.R. 221 (Bankr. N.D. Cal. 

1991). These limitations stem, in part, from the constitutional issues 

discussed at Part II and § 904 of the Bankruptcy Code. Accordingly, 

a Chapter 9 case can end in one of two ways: a confirmed plan of 

adjustment or a dismissal.

10. Pension and Labor Issues

One significant role of a municipality is as an employer to the many 

individuals who serve it in one way or another. For example, they 

may be members of the police, fire, or transportation districts; teachers in secondary or higher education institutions; or health care providers. These employees may participate in a defined benefit plan 

or a defined contribution plan, and they may be entitled to other 

postemployment benefits (“OPEB”) such as health care.
22

Navigating Chapter 9 of the Bankruptcy Code

Many public employees participate in defined benefit plans, in 

which the plan sponsor—i.e., the state or local government—promises a specified pension payment to each participating employee that 

is “typically determined by a formula based on the employee’s salary 

history and years of service.” William G. Gale & Aaron Krupkin, Financing State and Local Pension Obligations: Issues and Options, at 2, 

July 2016 (discussing basic issues with state and local pension plans), 

available at www.brookings.edu/wp-content/uploads/2016/07/PBPension-shortfalls-and-SL-budgets.pdf. A trust holds the funds dedicated to paying pension obligations under defined benefit plans, 

which primarily consists of contributions by the employer, perhaps 

the employees (levels of employee contributions vary by municipality), and investment returns. Id. at 2–3. If the level of contributions 

lags behind increases in benefits or longevity and/or if investment 

returns are depressed, the municipality’s pension plan may lack the 

funds necessary to satisfy all anticipated obligations under the plan.

Municipal pensions come in a variety of forms, with each having 

implications for restructuring and for attracting and retaining skilled 

employees. Some municipalities may participate in a multiemployer plan; other municipalities may have their own plans.  Some municipalities have different “tiers” of pension plans, depending on the 

start date of the employee. Some municipal plans are defined benefit 

plans, others are defined contribution plans. A state and its municipalities may participate in a single pension plan or the municipality 

may have its own plan. 

Each structure presents potential issues. For example, a state 

and its municipalities may participate in a multiemployer defined 

benefit pension plan that is administered as either an agent plan or 

a cost-sharing plan. In an agent plan, “assets are pooled for investment purposes but the plan maintains separate accounts so that each 

employer’s share of the pooled assets is legally available to pay benefits only for its employees.” Alicia H. Munnell & Jean-Pierre Aubry, 

GASB 68: How Will State Unfunded Pension Liabilities Affect Big Cities?, January 2016, at 2, available at crr.bc.edu/wp-content/uploads/

2016/01/SLP_47.pdf. In contrast, in a cost-sharing plan, “the pension 

obligations, as well as the assets, are pooled, and the assets can be used 

to pay the benefits of any participating employer.” Id. In 2015, the 

GASB changed how governmental entities report unfunded pension 

obligations. Governmental entities must now report any unfunded 
23

IV. General Administrative Matters

pension obligations in the balance of the employer, including in the 

context of cost-sharing plans. Id. at 1.

In addition to providing and managing employee pension benefits and OPEBs, municipalities also must address matters common 

to any employment relationship. These issues include the hiring and 

firing of employees; claims arising out of employees’ conduct or the 

employment relationship itself; and labor issues that may involve 

claims under, or the renegotiation of, a collective bargaining agreement. Indeed, employees of larger municipalities may be represented 

by several different labor organizations and be covered by several 

different collective bargaining agreements.

Any or all of these pension and labor issues may present unique 

challenges in a Chapter 9 case. Some of these issues are addressed 

below at Part VI.C.

11. Plan Process

Only a debtor may file or modify a Chapter 9 plan of adjustment, 

and competing plans are prohibited. The Bankruptcy Code does not 

contain any filing deadlines with respect to the plan. Rather, if the 

plan is not filed with the petition, the judge can establish appropriate 

deadlines under § 941 of the Bankruptcy Code. Additional information is provided at Part VII.

IV. General Administrative Matters

A. Appointment of the Bankruptcy Judge

Under § 921(b) of the Bankruptcy Code, the chief judge of the court 

of appeals designates the bankruptcy judge to administer the case. 

According to legislative history, the purpose of this provision is 

to ensure that the selection of the judge in a Chapter 9 case takes 

into account calendar demands and the judges’ levels of experience. 

S. Rep. No. 95-989, at 5896 (1978). Moreover, there is no authority suggesting that the chief judge must appoint a bankruptcy judge 

from the district in which the case is filed. Section 921(b) states 

only that, “[t]he chief judge of the court of appeals for the circuit 

embracing the district in which the case is commenced shall designate the bankruptcy judge to conduct the case.” In fact, the chief 

judge of the U.S. Court of Appeals for the First Circuit appointed a 
24

Navigating Chapter 9 of the Bankruptcy Code

bankruptcy judge from the U.S. Bankruptcy Court for the District 

of Massachusetts to preside over the Chapter 9 case of Central Falls, 

Rhode Island. Therefore, the bankruptcy court should not configure its case management/electronic case filing (CM/ECF) system to 

automatically or randomly assign Chapter 9 cases to a bankruptcy 

judge as it does with other kinds of cases. (See the related discussion 

in Part IV.D.)

The bankruptcy clerk of court needs to understand the process 

used in his or her circuit to request the appointment of a bankruptcy 

judge in a Chapter 9 case. If no such process exists, the bankruptcy 

clerk of court may want to consider discussing with the bankruptcy 

chief judge and the court of appeals the value of adopting appropriate 

procedures to ensure the timely designation of the bankruptcy judge. 

The online repository provides resources regarding the appointment 

of the bankruptcy judge, including general guidance for the bankruptcy clerk of court in requesting the designation of a bankruptcy 

judge from the court of appeals, CM/ECF event codes needed for 

the designation, a sample request and order for designation, and requests and designation orders used in a selection of cases.

B. Potential Resource Issues

As suggested by the legislative history to § 921(b) discussed immediately above, a Chapter 9 case may be time- and resource-intensive. 

Such cases might take up almost all of a judge’s time and involve 

complex legal questions. S. Rep. No. 95-989, at 5896 (1978). Similar 

resource concerns are present for the clerk’s office. The extent of additional resources required by the judge and the clerk of court will 

vary depending on the kind and size of the municipality and the 

number of stakeholders involved in the case, along with the need for 

continued management of the court’s existing caseload. In assessing 

the court’s ability to handle any kind of Chapter 9 case, the judge and 

the clerk of court should consider the matters discussed below.

1. Dedicated Staff

Staffing concerns are present for both chambers and clerk’s offices. 

At the chambers level, the judge may decide an additional law clerk 

and/or judicial assistant is needed to handle the additional workload 

created by the Chapter 9 case. Options for obtaining temporary ad-
25

IV. General Administrative Matters

ditional chambers staff assistance include (1) using staff from another judge in the court (with that judge’s permission); (2) submitting 

a request for law clerk assistance through the Law Clerk Assistance 

Program on the JNet; (3) requesting temporary personnel from the 

circuit judicial council (funded by the circuit’s temporary emergency fund); and (4) requesting an additional temporary bankruptcy 

law clerk from the AO’s Judicial Services Office (funded by the AO’s 

temporary bankruptcy law clerk fund).

The clerk of court faces similar concerns of balancing workload. The scheduling, coordination, and other logistical challenges 

that may be associated with a Chapter 9 case may warrant the assignment of a single individual whose primary responsibilities focus 

on the Chapter 9 case during the case’s pendency. That person may 

be a member of the court’s existing staff or may be an employee of 

the debtor, as contemplated under 28 U.S.C. § 156(c). Alternatively, 

responsibilities may be shared among a small group of bankruptcy 

court staff. Because of the need for timely completion of docketing 

activity, consideration might be given to instituting alternative work 

schedules and granting compensatory time.

The clerk of court may want to consider assigning specific individuals within the clerk’s office to handle all inquiries relating to 

the Chapter 9 case. Perhaps one of the most time-consuming, yet 

important, aspects of a Chapter 9 case is responding to requests for 

information from stakeholders and individual citizens who may not 

be familiar with the bankruptcy process. Helping these parties to obtain timely and accurate information about the case can help the case 

itself run more efficiently. The clerk of court may want to consider 

contacting the debtor and its counsel because the debtor may have a 

website and/or public information officer to deal with inquiries. The 

clerk of court may consider workload issues related to other areas 

of the clerk’s office, including the information technology staff and 

their role in supporting management of the case. Where appropriate, the clerk of court may consider sharing arrangements with other 

court units to address workload concerns.

2. Courtroom Space and Access to the Proceedings

The court may need to weigh the management of its existing caseload against the necessity for dedicated space for the Chapter 9 case. 

Depending on the size of the Chapter 9 case, the judge and the clerk 
26

Navigating Chapter 9 of the Bankruptcy Code

of court may want to consider whether existing courtroom space 

sufficiently accommodates the number of parties in interest, as well 

as public observers (including media) who may be interested in the 

proceedings. To the extent existing courtroom space is insufficient, 

the judge and the clerk of court may want to consider whether alternative space at the district court, the court of appeals (if in the 

same location), or a state court would be available and suitable for 

proceedings in the Chapter 9 case. Similarly, the judge and the clerk 

of court may want to consider the feasibility of establishing overflow 

rooms, in which observers can watch the proceedings via internal 

video and audio feeds. In addition, posting the audio recording of 

court proceedings, after their conclusion, to the case docket in a 

timely manner allows stakeholders and public observers access to 

the recordings through the judiciary’s Public Access to Court Electronic Records (PACER) system. In all matters concerning access to 

court proceedings, the judge and the clerk of court should take care 

to consult the policies of the Judicial Conference.

3. Website Issues

Intense interest in the case may warrant the court adding information to its website or highlighting information already available on 

the court’s website as a way to aid the bar, media, and public. Examples include the dates, times, and locations of hearings; the court’s local rules, including those concerning pro hac vice admission; points 

of contact to order transcripts and obtain CM/ECF logins and passwords; and links to the website of the Chapter 9 debtor or to the website of a third-party noticing agent employed pursuant to 28 U.S.C. 

§  156(c). See discussion below and in Part IV.D.

4. Teleconferencing or Videoconferencing for Hearings

An issue closely related to general access to court proceedings is the 

judge’s ability and willingness to allow parties in interest and perhaps 

others to participate in court proceedings via either teleconference 

or videoconference. Teleconferencing or videoconferencing may increase efficiency but may also introduce challenges in a Chapter 9 

case. For example, given the number of parties in interest that may 

want to participate in any given Chapter 9 proceeding, teleconferencing or videoconferencing may save both time and costs for the case 
27

IV. General Administrative Matters

and parties. However, if a large number of parties want to participate 

actively in the court proceeding via teleconference or videoconference, the proceeding could become unmanageable and inefficient. 

Accordingly, a judge using teleconferencing or videoconferencing for hearings should consider establishing appropriate protocols 

to safeguard the process. Any such protocols might:

• restrict active telephonic participation to parties in interest 

or their professionals with permission of the court, and allow 

participation by others, if at all, in a passive or “listen only” 

mode; 

• limit all remote participation to a passive or “listen only” 

mode; 

• prohibit, in accordance with Judicial Conference policy, the 

recording of any proceedings, including those in which teleconferencing or videoconferencing is permitted; 

• restrict the distribution of, and access to, the conferencing 

line; 

•  enable the administrator of the conferencing line to disconnect any participant who is being disruptive to the proceedings; and 

•  permit videoconferencing only for parties necessary to a proceeding who are unavailable to appear in person for good 

cause in compelling circumstances. In all matters concerning 

participation in and access to court proceedings, the judge 

and the clerk of court should take care to consult the policies 

of the Judicial Conference and the Rules of Procedure. For 

more information, see Remote Participation in Bankruptcy 

Court Proceedings (Federal Judicial Center 2017), a copy of 

which is included in the online repository.

5. Media Communications

Because many Chapter 9 cases involve matters that may touch the 

general public directly or indirectly, these cases can garner more media coverage than the typical Chapter 11 case. This kind of media 

coverage, in turn, means that the judge and the clerk of court may 

receive an increased number of media inquiries during the pendency (and perhaps even in anticipation) of a Chapter 9 case. The judge 
28

Navigating Chapter 9 of the Bankruptcy Code

and the clerk of court may want to consider establishing a protocol 

for addressing media inquiries. The court may also want to consider designating a particular qualified individual to handle all media 

inquiries, thereby ensuring appropriate, consistent, and accurate 

responses to media inquiries. To help prepare any such designated 

individual, the clerk of court may want to consider training opportunities for the individual or for the clerk of court’s office generally. 

In addition, the district court may already have a media officer or individual designated to handle media inquiries that could be available 

to the bankruptcy clerk of court either to handle the media matters 

in the Chapter 9 case or to help train individuals within the bankruptcy clerk of court’s office for such matters. The court or the clerk 

of court also should know the point of contact for the Chapter 9 

entity in order to refer inquiries that do not fall within the court’s 

purview. 

In addition, the court may want to consider entering an administrative order governing media conduct, courtroom procedure, and 

decorum. Such an order could address issues such as the permitted 

timing and security screening for entering court sessions; procedures 

regarding media identification badges; use of electronic devices; prohibitions against recording, photography, and broadcasting in accordance with Judicial Conference policies, including any limitations regarding “contemporaneous” blogging; permitted areas for interviews 

and press conferences and restrictions on conducting them inside 

the courthouse; and consequences for violating the order. See, for 

example, the online repository for an administrative order entered 

by the chief district judge and chief bankruptcy judge for the Eastern 

District of Michigan in connection with the Detroit case.

6. Coordination with the District Court

A good line of communication between the bankruptcy court and 

the district court can be helpful in many Chapter 9 cases. Prior to 

any Chapter 9 filings in the district, the chief bankruptcy judge and 

the bankruptcy clerk of court may discuss with the district court how 

best to handle a Chapter 9 case. For example, discussion could cover 

the space, access, and media issues identified above. Other points 

could include identifying collective resources that may be available 

to assist the bankruptcy judge and bankruptcy clerk of court, or identifying a process through which such resources could be requested 
29

IV. General Administrative Matters

and secured at the time of any filing. Although the timing and nature of discussions between the bankruptcy and district courts and 

the clerks of court will depend on the customs and practices of each 

individual district, establishing those lines of communications can 

greatly assist the administration of the Chapter 9 case.

7. Security Issues

Depending on the kind and size of the Chapter 9 entity, additional 

security measures may be needed to manage the case. The judge and 

the clerk of court should consult the U.S. Marshals Service in their 

district about the use of existing security protocols and the possible 

need for new security protocols as the case proceeds. Any protocols 

employed or established for the case should be disseminated to appropriate chambers and clerk’s office staff to ensure maximum safety 

for all concerned. Examples include a court security officer (CSO) 

escort for the judge; a CSO presence in the courtroom for the duration of the hearings; a CSO directing seating for attorneys, press, 

and the public in the courtroom; U.S. marshals providing security 

advice/tips to the judge and staff; and protocol for alerting the U.S. 

Marshals Service to potential threats.

8. Claims Agent 

Depending on the size and volume of assets and liabilities and on 

the number of creditors, the clerk of court may consider employing 

an agent to provide claims-processing services pursuant to 28 U.S.C. 

§  156(c). This statutory provision was enacted in the days when 

proofs of claims were only submitted to the court in paper form. 

With the widespread use of CM/ECF for filing proofs of claim, clerks 

of court should examine whether employing a claims agent adds value to the court. If so, the clerk of court should work with the judge 

to ensure that the terms of any order appointing the claims agent 

address only those duties possessed by the clerk of court that are delegated to the claims agent. If a claims agent is employed, the clerk of 

court must arrange for all claims in the case to be added to the court’s 

CM/ECF system at the end of the case, before any proofs of claim 

can be disposed of by the claims agent. If employing a claims agent 

is not perceived to aid the court, the Chapter 9 debtor may consider 

employing a claims analytics professional as a case or confirmation 
30

Navigating Chapter 9 of the Bankruptcy Code

requirement instead of seeking appointment of a claims agent under 

28 U.S.C. § 156(c). Such employment is subject to the provisions of 

full disclosure and reasonableness found in 11 U.S.C. § 943(b)(3).

9. Noticing Agent

The clerk of court may consider employing an agent to provide noticing services pursuant to 28 U.S.C. § 156(c). Although courts typically use the Bankruptcy Noticing Center for noticing in bankruptcy 

cases, the size of a particular Chapter 9 case may warrant additional 

resources. Not all Chapter 9 cases require use of a noticing agent, 

but employing an agent in cases involving thousands of creditors 

may greatly assist the clerk of court in exercising statutory noticing 

duties. Under the terms of the statute, a noticing agent is the agent 

of the clerk of court and not the debtor, meaning the clerk of court 

should work with the judge to ensure that the terms of any order 

appointing the noticing agent address only those duties possessed 

by the clerk of court that are delegated to the noticing agent. One 

potential issue with the appointment of a noticing agent is the payment of the agent’s fees, as the court may not be able to direct the 

Chapter 9 debtor to pay such fees.

C. Required Notices in Chapter 9 Cases

Section 923 of the Bankruptcy Code mandates three separate notices 

in Chapter 9 cases. Specifically, it requires notice of (1) the commencement of the case, (2) an order for relief, and (3) any dismissal 

of the case. Section 923 further provides that such notice shall be 

given by publication “at least once a week for three successive weeks 

in at least one newspaper of general circulation within the district 

in which the case is commenced, and in such other newspaper having general circulation among bond dealers and holders as the court 

designates.” 11 U.S.C. § 923. 

The legislative history and comment to § 923 states that “[t]he 

exact contours of the notice to be given under chapter 9 are left to 

the Rules.” H.R. Rep. No. 95-595, at 6354 (1978). Federal Rule of 

Bankruptcy Procedure 2002 addresses generally the time, the circumstances, and to whom notice must be given. Bankruptcy Rule 

9007, General Authority to Regulate Notices, permits the judge to 

regulate all other aspects of the time and manner of such notice.
31

IV. General Administrative Matters

Bankruptcy Rule 9008, Service or Notice by Publication, authorizes the judge to determine the form and manner of publication unless otherwise specified in the rules. Some districts have local rules 

designating the newspapers in which notice is to be published. Other 

judges have designated the newspapers on a case-by-case basis as the 

need arises. In addition, the judge and the clerk of court may want to 

identify other mediums that may better reach potential stakeholders 

and interested members of the public—such mediums include the 

court’s webpage, any electronic information boards available to municipal employees or other stakeholders, and any local print mediums that may reach a broader or different population than the local 

newspaper. Although neither the Bankruptcy Code nor the Bankruptcy Rules require such additional noticing, it may, as a practical 

matter, facilitate better information to those interested in the case 

and ease the burden on the clerk of court’s office to respond to oneoff inquiries. 

The publication requirement can be expensive. Particularly in 

smaller cases, the bankruptcy judge must balance considerations of 

due process and the cost of compliance in determining what publication will suffice. The judge and the clerk of court should address 

together the details of the notice of commencement (including the 

place of publication, the content, and the parties to be served) to 

address any potential cost or service issues. This discussion should 

cover not only modifications to the substance of the notice itself, but 

also the implications for the court’s CM/ECF program in the creation and service of the notice. 

D. Electronic Filing and Docket Issues

The clerk of court should anticipate and consider several potential 

issues with the court’s electronic case filing system. Among the most 

important concerns, the clerk must ensure the electronic case filing 

system is not set up to automatically assign a judge to a Chapter 9 

case as it is set up to do so for cases in all other chapters. Staff who 

are involved in CM/ECF configuration may not have been aware that 

Chapter 9 cases should not be automatically assigned a judge. For 

this reason, the clerk must investigate and test the CM/ECF system 

on this point before a Chapter 9 case is filed. Additionally, the clerk 

must ensure the proper CM/ECF event codes are created in advance 

of the Chapter 9 filing so that the filing proceeds smoothly. Examples 
32

Navigating Chapter 9 of the Bankruptcy Code

include event codes for designation of the judge, request for designation, and order of designation. See the related materials in the online 

repository.

The judge and the clerk of court should recognize that many 

stakeholders and members of the public who are interested in the 

case will not be registered users in the electronic filing system. As 

such, many individuals may not have access to view and monitor 

activities in the Chapter 9 case through CM/ECF. This need can be 

addressed by educating this population about the PACER system 

and how it is used to view and monitor case-related activities. If the 

court has employed a third-party agent under 28 U.S.C. § 156(c), it 

can consider what documents it wants the agent to make available on 

its website for the general public to view. This approach was taken, 

for example, in the Detroit case. Similarly, the Chapter 9 debtor itself 

may maintain a website to provide free access to all key pleadings, 

such as was done by the cities of Stockton and Vallejo. See the related 

documents in the online repository. 

A related issue concerns the information disclosed with respect 

to certain of the debtor’s creditors and employees. Many states and 

municipalities have rules or regulations prohibiting the disclosure of 

personal information for at least certain kinds of employees, typically members of the police, fire, and other safety-related districts. Further, some Chapter 9 entities are considered “covered entities” under 

the Health Insurance Portability and Accountability Act (HIPAA), 

requiring protection of personally identifiable health information by 

the Chapter 9 debtor. Although the court needs at least a mailing 

address for these employees and any patients, the disclosure of such 

information beyond the court should comply with any applicable 

federal, state, or local rules intended to protect the privacy of such 

individuals. To anticipate and address this issue, the court may want 

to establish protocols when considering motions to file under seal 

a portion of the debtor’s list of creditors under § 924 and any other pleadings, such as proofs of claim containing personal creditor, 

patient, or employee information. For example, in the Stockton and 

Vallejo cases, by agreement with those debtors, the unions representing safety officers received all the notices. (Note: It is important to try 

to address this issue before any list, schedule, or other paper is filed 

through the court’s electronic filing system because even if the clerk 

of court subsequently removes the filing, secondary sources of court 
33

V. The Beginning of the Case

dockets may have picked up the filing and made it available to the 

public or subscribers.) See examples and related information in the 

online repository.

V. The Beginning of the Case

The primary issue at the beginning of the case is the debtor’s eligibility to receive an order for relief. Eligibility often is a heavily litigated 

issue in Chapter 9 cases, and to some extent, the case does not really 

begin until the judge determines the debtor’s eligibility. Accordingly, 

the judge should consider how to approach any dispute concerning 

eligibility. For example, should the judge establish a specific timetable for the litigation or let the parties determine the timing? Should 

the judge allow discovery or appoint a mediator at this early stage of 

the case? Should the judge dismiss the case? These and other important first-day issues are addressed below.

A. Commencement of the Case

The Bankruptcy Code defines “municipalities” as a “political subdivision or public agency or instrumentality of a State.” 11 U.S.C. 

§ 101(40). Only a municipality may file a voluntary bankruptcy case 

under Chapter 9 of the Bankruptcy Code. Involuntary petitions 

against a municipality are not permitted. 11 U.S.C. § 109(c). Notwithstanding §§ 109(d) and 301, a Chapter 9 case concerning an unincorporated tax or special assessment district that does not have its 

own officers is commenced by such district’s governing authority or 

body that has authority to levy taxes or assessments to meet the obligations of such district. 11 U.S.C. § 921(a). Notice of the commencement of the case, as governed by § 923, must be given and published, 

as discussed at Part IV.C.

B. Order for Relief or Dismissal of the Petition (Including for 

Lack of Good Faith)

The Bankruptcy Abuse Prevention and Consumer Protection Act of 

2005 (BAPCPA) amended § 921(d) to eliminate the automatic entry 

of an order for relief in Chapter 9 cases, notwithstanding § 301(b). 

Under the amended § 921 procedure, upon objection, the judge may 

dismiss the petition, after notice and hearing, if the debtor did not 
34

Navigating Chapter 9 of the Bankruptcy Code

file the petition in good faith or if the petition does not meet the 

requirements of the Bankruptcy Code. 11 U.S.C. § 921(c). If the petition is not dismissed, the judge shall enter an order for relief notwithstanding § 301(b). 11 U.S.C. § 921(d).

Section 921 does not define good faith, but judges in Chapter 9 

cases have been guided by similar determinations in Chapter 11 cases. See, e.g., In re County of Orange, Cal., 183 B.R. 594, 608 (Bankr. 

C.D. Cal. 1995). For example, the judge may consider the debtor’s 

ability to confirm a plan of adjustment and whether the filing is intended to hinder or delay creditors. See, e.g., In re Sullivan County 

Regional Refuse Disposal Dist., 165 B.R. 60, 80–83 (Bankr. D.N.H. 

1994). Other factors include “(i) the debtor’s subjective beliefs; 

(ii)  whether the debtor’s financial problems fall within situations 

contemplated by chapter 9; (iii) whether the debtor filed its chapter 9 

petition for reasons consistent with the purpose of chapter 9; (iv) the 

extent of the debtor’s prepetition negotiations, if practical; (v) the extent that alternatives to chapter 9 were considered; (vi) the scope and 

nature of the debtor’s financial problems.” 6 Collier on Bankruptcy 

¶ 921.04[2] (16th ed. 2017). See also In re City of Detroit, Mich., 504 

B.R. 97, 180–81 (Bankr. E.D. Mich. 2013) (collecting cases) (additional cases addressing the good-faith determination are available 

in the online repository). In addition, if a debtor has satisfied all of 

the other eligibility requirements, some cases suggest that the debtor 

enjoys a presumption of good faith, which an objecting party must 

overcome. See Detroit, 504 B.R. at 180 (“‘[I]f all of the eligibility criteria set forth in § 109(c) as described above are satisfied, it follows 

that there should be a strong presumption in favor of chapter 9 relief.’”) (quoting In re City of Stockton, Cal., 493 B.R. 772, 794–95 

(Bankr. E.D. Cal. 2013)). Likewise, a failure to satisfy one or more of 

the § 109(c) elements may support a finding of a lack of good faith 

in filing the Chapter 9 petition. See Sullivan County Disposal Dist., 

165 B.R. at 80 (dismissing the petition because of a lack of good faith 

under both §§ 109(c)(5)(B) and 921(c)). A collection of pleadings 

and orders addressing eligibility and good-faith issues is available in 

the online repository.

C. Eligibility Issues

A municipality is not automatically eligible to proceed as a debtor 

in a Chapter 9 case. Rather, the Bankruptcy Code contains detailed 
35

V. The Beginning of the Case

statutory requirements that the municipal debtor must satisfy before 

the judge may enter an order for relief in the case. 11 U.S.C. § 109(c). 

The municipal debtor has the burden of proof on the elements of its 

eligibility by a preponderance of the evidence. See, e.g., In re City of 

Detroit, Mich., 504 B.R. 97, 128–29 (Bankr. E.D. Mich. 2013); In re 

City of Stockton, Cal., 493 B.R. 772, 794 (Bankr. E.D. Cal. 2013); In 

re City of Vallejo, Cal., 408 B.R. 280, 289 (B.A.P. 9th Cir. 2009); In 

re City of Bridgeport, 129 B.R. 332, 334 (Bankr. D. Conn. 1991). A 

municipality’s eligibility for Chapter 9 is perhaps one of the most 

contested aspects of a Chapter 9 case. As noted above, a collection of 

pleadings and orders addressing eligibility and good-faith issues is 

available in the online repository.

To be eligible, the municipality must be an “entity” and must 

satisfy the five elements of § 109(c)(1)–(5). Section 101(15) defines 

entity to include “person, estate, trust, governmental unit, and United States trustee.” The requirements of § 109(c)(1)–(5) are discussed 

below. 

1. Meet the Definition of a Municipality (§ 109(c)(1))

The entity must be a municipality, which is defined in § 101 as a 

“political subdivision or public agency or instrumentality of a State.” 

11 U.S.C. §§ 109(c)(1), 101(40). The Bankruptcy Code does not offer 

any guidance as to what kinds of entities qualify as a municipality for 

purposes of Chapter 9. Judges have relied on, among other things, 

prior municipal bankruptcy legislation to inform their analysis and 

application of the § 101(40) definition of municipality. See, e.g., In re 

Cty. of Orange, Cal., 183 B.R. 594, 601 (Bankr. C.D. Cal. 1995); In re 

N.Y.C. Off-Track Betting Corp., 427 B.R. 256, 265 (Bankr. S.D.N.Y. 

2010); In re Las Vegas Monorail Co., 429 B.R. 770, 795 (Bankr. D. 

Nev. 2010).

2. Be Specifically Authorized (§ 109(c)(2))

The entity must be “specifically authorized, in its capacity as a municipality or by name, to be a debtor under [Chapter 9] by State law, 

or by a governmental officer or organization empowered by State 

law to authorize such entity to be a debtor under [Chapter 9].” 11 

U.S.C. § 109(c)(2) (emphasis added). Therefore, the relevant state 

statutes must be carefully analyzed. For example, Connecticut re-
36

Navigating Chapter 9 of the Bankruptcy Code

quires a municipality to obtain the “express prior written consent of 

the Governor.” Conn. Gen. Stat. § 7–566 (1993). Kentucky requires 

the state debt and finance officer to approve the proposed plan before a Chapter 9 petition is filed. Ky. Rev. Stat. Ann. § 66.400 (West 

1994). Louisiana requires a municipality to obtain the consent of the 

governor and the state attorney general before filing for Chapter 9. 

La. Rev. Stat. Ann. § 39:619 (2005). California requires mediation or 

a “fiscal emergency.” Cal. Gov’t Code §§ 53760.1, .3, .5, .7, .9. For an 

example of the kinds of issues that can arise in interpreting a state’s 

authorization statute, see In re Jefferson County, Alabama, 469 B.R. 

92, 100–11 (Bankr. N.D. Ala. 2012).

Three issues worth noting on this second requirement: 

• First, prior to 1994, the Bankruptcy Code required only that 

the municipality be “generally authorized” to file a Chapter 9 

case. At least two courts have interpreted the post-1994 language of “specifically authorized” to require the authorization 

to be “exact, plain, and direct with well-defined limits so that 

nothing is left to inference or implication.” In re County of 

Orange, Cal., 183 B.R. 594, 604 (Bankr. C.D. Cal. 1995). See

Suntrust Bank v. Allegany-Highlands Econ. Dev. Auth. (In re 

Allegany-Highlands Econ. Dev. Auth.), 270 B.R. 647 (W.D. Va. 

2001) (following the reasoning of In re County of Orange).

• Second, a state’s authorization statute cannot condition a municipal’s ability to file a Chapter 9 case on requirements that 

conflict with the Bankruptcy Code. See, e.g., In re City of 

Stockton, Cal., 478 B.R. 8, 16–17 (Bankr. E.D. Cal. 2012) (collecting cases); In re City of Detroit, Mich., 504 B.R. 97, 161–62 

(Bankr. E.D. Mich. 2013). If a municipality is authorized to 

file a Chapter 9 case, once such a case is filed, the Bankruptcy Code governs the case in its entirety. A state can, however, 

condition authorization for a municipality to file bankruptcy on prerequisites to the filing of a Chapter 9 case, such as 

engaging in a neutral evaluation process with creditors. See, 

e.g., In re City of Stockton, Cal., 475 B.R. 720 (Bankr. E.D. Cal. 

2012) (explaining such a statute, California Government Code 

§ 53760). 

• Finally, states differ significantly on their approaches to authorization. Some states have enabling legislation, but that 
37

V. The Beginning of the Case

legislation may be outdated and, for example, reference the 

Bankruptcy Act. Some states require approval specific to the 

particular municipality seeking Chapter 9 protection. And almost half the states have no legislation. A summary of each 

state’s legislation, if any, is in the online repository. The absence of legislation does not preclude a state from passing legislation for one municipality.

3. Be Insolvent (§ 109(c)(3))

The entity must be insolvent. 11 U.S.C. § 109(c)(3). Section 101(32)(c) 

defines insolvency of municipalities as a financial condition such 

that the municipality is “(i) generally not paying its debts as they 

become due unless such debts are the subject of a bona fide dispute; 

or (ii) unable to pay its debts as they become due.” Under the second 

prong, the municipality must utilize a prospective analysis of its expenses and available resources. Neither the Bankruptcy Code nor the 

legislative history provides guidance regarding the time period for 

the analysis, but judges generally use a relatively narrow time span, 

i.e., the current fiscal year or an adopted budget for the subsequent 

fiscal year, in order to ensure the reliability of the projections on 

which the analysis is based. See In re Vallejo, Cal., 408 B.R. at 289–94 

(affirming bankruptcy court’s finding that debtor had demonstrated 

insolvency on a going-forward cash flow basis in light of, inter alia, 

a current year deficit of over $10 million in its general fund and an 

inability to utilize its special funds because of grant and accounting 

restrictions); In re Bridgeport, 129 B.R. at 337–38 (concluding, after 

adopting a prospective cash-flow or budget-gap analysis and not a 

budget-deficiency analysis, that the debtor had not met its burden 

of proving that it was insolvent, i.e., that it would be unable to pay 

its debts as they became due in its current fiscal year, or based on 

an adopted budget its next fiscal year). See also In re Ravenna Metro. Dist., 522 B.R. 656, 676–80 (Bankr. D. Colo. 2014) (holding that 

the district failed to show its insolvency under a forward-looking 

test because of, among other things, the district’s access to facilitiesacquisition fees on property owners in amount sufficient to pay lease 

obligations in full). The specific period for analysis, however, may 

depend on the kind and size of the municipality and other case-specific factors.
38

Navigating Chapter 9 of the Bankruptcy Code

For the time period utilized, the debtor should do more than 

simply show that its expenditures will exceed its revenue as it might 

be able to pay debts as they become due by, for example, getting 

state or federal assistance, concessions by labor unions, voluntary 

suspension of tax abatements, savings through efficiency, increased 

tax-collection rates, and borrowing funds to offset budget gaps. In re 

Bridgeport, 129 B.R. at 338. At least one judge has observed that the 

insolvency requirement does not require the municipality to exhaust 

its taxing or assessment authority. In re Pleasant View Util. Dist. of 

Cheatham Cty., 24 B.R. 632, 639 n.6 (Bankr. M.D. Tenn. 1982); see 

also In re City of Vallejo, Cal., 408 B.R. at 293 (B.A.P. 9th Cir. 2009) 

(bankruptcy court reasoned that showing of insolvency does not require debtor first to have taken actions that defy fiscal prudence). 

Notwithstanding the § 101 definition, some courts have looked beyond financial condition to “service insolvency,” that is, whether a 

municipality has the resources to provide basic civic services such as 

police and fire protection. See In re City of Detroit, Mich., 504 B.R. 

97, 169–70 (Bankr. E.D. Mich. 2013); In re City of Stockton, Cal., 493 

B.R. 772, 789 (Bankr. E.D. Cal. 2013).

4. Desire to Effect a Plan (§ 109(c)(4))

The municipality “desires to effect a plan to adjust such debts.” 11 

U.S.C. § 109(c)(4).

5. Demonstrate Progress (§ 109(c)(5))

The municipality must demonstrate its progress toward a plan of 

adjustment and why those efforts have failed to date. Specifically, 

§ 109(c)(5) requires that the municipality

(A) has obtained the agreement of creditors holding at 

least a majority in amount of the claims of each class that 

such entity intends to impair under a plan in a case under 

such chapter;

(B) has negotiated in good faith with creditors and has 

failed to obtain the agreement of creditors holding at 

least a majority in amount of the claims of each class that 

such entity intends to impair under a plan in a case under 

such chapter;
39

V. The Beginning of the Case

(C) is unable to negotiate with creditors because such negotiation is impracticable; or

(D) reasonably believes that a creditor may attempt to 

obtain a transfer that is avoidable under section 547 of 

this title.

11 U.S.C. § 109(c)(5). Notably, the § 109(c)(5) factors are stated in 

the alternative. A debtor needs to establish only one of the four factors to satisfy this requirement. For cases addressing the negotiation 

factors of § 109(c)(5)(B) and (C), see, e.g., In re Sullivan County Regional Refuse Disposal Dist., 165 B.R. 60, 78 (Bankr. D.N.H. 1994) 

(explaining that debtor must propose a plan that can be effectuated 

in Chapter 9 to satisfy § 109(c)(5)); In re City of Vallejo, Cal., 408 

B.R. 280 (B.A.P. 9th Cir. 2009) (analyzing § 109(c)(5)(B) and finding that negotiations need to revolve around at least the outline of a 

proposed plan of adjustment; mere good-faith negotiations are not 

enough); In re New York City Off-Track Betting, 427 B.R. 256 (Bankr. 

S.D.N.Y. 2010) (noting that a term sheet or outline of a plan suffices 

for purposes of § 109(c)(5)(B)); In re City of Detroit, Mich., 504 B.R. 

97 (Bankr. E.D. Mich. 2013) (observing that good-faith plan negotiations were not required under state enabling legislation and that 

although the debtor did not meet the good-faith negotiation requirement of § 109(c)(5), such negotiations were impracticable under 

§ 109(c)(5)(C)). At least one court has held that the duty to negotiate 

in good faith over a proposed plan is reciprocal. See In  re City of 

Stockton, Cal., 493 B.R. 772, 793 (Bankr. E.D. Cal. 2013).

D. Objections to the Petition

As suggested at Parts V.B and V.C, the municipality’s eligibility to 

be a debtor under Chapter 9, as well as whether the debtor filed the 

Chapter 9 petition in good faith, may be vigorously contested. This 

creates a flurry of activity on the court’s docket at the outset, and 

the judge must determine how to manage this litigation. The judge 

should consider adopting a bar date and a procedure for objections 

to the petition. Neither the Bankruptcy Code nor the Bankruptcy 

Rules specify the time within which objections to the petition must 

be filed. To ensure adequate opportunity to file objections, judges 

may want to set a bar date in conjunction with an order approving 

the form of notice of the Chapter 9 filing. For example, judges have 
40

Navigating Chapter 9 of the Bankruptcy Code

set the bar date fifteen days after the third and final publication of the 

initial notice of the case. See, e.g., In re City of Harrisburg, Pa., Case 

No. 11–06938 (Bankr. M.D. Pa. Oct. 11, 2011); In re City of Vallejo, 

Cal., Case No. 2008–26813 (Bankr. E.D. Cal. May 30, 2008). A collection of sample notices is in the online repository.

It might be useful to hold a pretrial conference with the parties 

to narrow the issues presented by an objection and to manage discovery, pretrial submissions, trial procedure, and trial scheduling. It 

also might be efficient and cost effective to bifurcate hearings where 

several issues are raised by an objection. For example, if an objection 

challenges both the debtor’s authorization to file a Chapter 9 petition 

and its insolvency, the judge might first determine the essentially legal issue of the municipality’s authorization before considering the 

more fact-sensitive insolvency issue. See In re City of Bridgeport, 

129 B.R. 332, 334 & n.3 (Bankr. D. Conn. 1991). 

The judge may not delay any proceeding in a Chapter 9 case in 

the event an appeal is taken from an order overruling an objection 

to the petition and subsequent entry of an order for relief. 11 U.S.C. 

§ 921(e). Specifically, § 921(e) provides,

The court may not, on account of an appeal from an order for relief, delay any proceeding under this chapter in 

the case in which the appeal is being taken; nor shall any 

court order a stay of such proceeding pending such appeal. The reversal on appeal of a finding of jurisdiction 

does not affect the validity of any debt incurred that is 

authorized by the court under section 364(c) or 364(d) 

of this title.

E. Standing Issues

Section 901(a) incorporates § 1109 in Chapter 9 cases. Accordingly, 

the term “parties in interest” in Chapter 9 includes, among others, 

“the debtor, the trustee, a creditors’ committee, . . . a creditor . . . 

or any indenture trustee.” 11 U.S.C. § 1109. It also includes parties 

whose interests may be affected by the Chapter 9 case. See, e.g., In 

re Addison Community Hosp. Auth., 175 B.R. 646 (Bankr. E.D. 

Mich. 1994) (explaining the broad approach to “party in interest” for 

standing purposes under § 1109). In addition to traditional creditors 

and other Chapter 11 stakeholders, citizens and organizations representing citizens or community interests may request standing to ap-
41

V. The Beginning of the Case

pear and be heard in Chapter 9 cases. Such requests may require the 

judge to consider the scope of § 1109 and permissive intervention 

under Bankruptcy Rule 2018(a). Cases addressing these issues include Addison Community Hospital Authority, 175 B.R. at 650 (“The 

Court concludes that the members of Concerned Citizens who are 

not creditors do not have standing to be heard under § 1109. This 

Court should not be so liberal in granting applications to be heard 

as to overburden the debt adjustment process.”) and In re Barnwell 

County Hospital, 459 B.R. 903 (Bankr. D.S.C. 2011) (holding that a 

citizens group lacked standing to object to debtor’s eligibility to file 

Chapter 9 case).

In addition, Bankruptcy Rule 2018 provides certain parties the 

right to intervene or be heard in Chapter 9 cases. Bankruptcy Rule 

2018(c) states, “The Secretary of the Treasury of the United States 

may, or if requested by the court shall, intervene in a chapter 9 case 

. . .” It further provides that the state may intervene in the case “with 

respect to matters specified by the court.” In addition, Bankruptcy 

Rule 2018(d) states, “In a chapter  9, 11, or 12 case, a labor union 

or employees’ association, representative of employees of the debtor, 

shall have the right to be heard on the economic soundness of a plan 

affecting the interests of the employees . . .” The judge may enter an 

order under Rule 2018(e) directing service on parties permitted to 

intervene or be heard in the case. Fed. R. Bankr. P. 2018.

F. Other Issues in the Beginning of the Case

In addition to making the eligibility determination, the judge may 

be asked to establish certain basic administrative matters early in 

the Chapter 9 case. In each instance, the judge may need, or benefit 

from, additional information and disclosures that are not readily accessible from the petition or other pleadings. Accordingly, the judge 

may want to request various kinds of information and obtain the 

parties’ proposed approach to administrative matters at the outset 

(or at least relatively early in the process). The following summarizes 

a few such issues, but is not intended to be an exhaustive list.

1. Understanding Events Leading up to the Filing

Although it is always helpful for the judge to understand the genesis 

of a debtor’s financial distress, it is particularly useful in the Chapter 
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Navigating Chapter 9 of the Bankruptcy Code

9 context. A variety of factors may contribute to a municipality’s financial issues, including a single economic shock such as a judgment 

against it, a long-term budget deficit, a declining population, a loss 

of economic opportunities, a large uninsured claim, and/or accounting issues. The municipality, its stakeholders, and the state also may 

have been engaged in a variety of different dealings, discussions, and 

negotiations prior to the filing. The history behind the municipality’s 

decision to file will help the judge determine if the municipality is 

eligible to be a Chapter 9 debtor under § 109(c) and may help the 

judge understand any objections to the debtor’s eligibility or petition. 

Knowing the history may also help the judge understand the political 

structure of the municipality and its relation with the state, and to anticipate potential issues the case may encounter as it moves forward.

2. Understanding the Debtor’s Objectives for the Case

In addition to understanding where the municipality has been in its 

financial journey, it is equally important for the judge to understand 

where the municipality intends to go during its case. Chapter 9 is 

focused on helping a municipal debtor achieve a plan of adjustment. 

Municipal debtors are fundamentally different from Chapter 

11 debtors in that municipal debtors are “mission-based”—not all 

of the municipality’s activities can be measured in economic terms, 

or reduced to dollars and cents, the way a commercial enterprise’s 

activities can. Municipalities have a broader role and different responsibilities than a business that is obligated only to shareholders 

or in the case of insolvency, to creditors. This may present a dilemma for parties when they try to resolve conflicts and develop a plan 

of adjustment. Public safety is the classic example of a government 

activity that cannot be measured solely on a cost basis. Public K–12 

education can be another. Bottom line, almost everything that occurs in the context of restructuring “mission-based” enterprises has 

to pass through two filters: necessity of the activity and economic 

reasonableness.

Although the role of the judge is in many respects more limited in a Chapter 9 case (than, for example, in a Chapter 11 case), 

the judge still will be called on to confirm the plan of adjustment. 

The judge can best prepare for the plan process, including any deadlines established under § 941 and any decisions made with respect 

to status conferences and case-management orders, if he or she has 
43

V. The Beginning of the Case

information concerning the debtor’s view of its strategy for emerging 

from Chapter 9, as well as creditors’ and potentially other parties’ 

views of that proposal. (See Part VII.)

3. Payment of Prepetition Claims

As discussed above, the Tenth Amendment and § 904 limit the 

judge’s authority over a municipal debtor and its property. Accordingly, a Chapter 9 debtor generally may pay prepetition obligations 

postpetition without court approval. Often the Chapter 9 debtor will 

pay its ordinary course trade creditors and employees as those debts 

come due, but may not pay its other prepetition creditors.

4. Payment of Postpetition Claims and Administrative Expenses

A municipality may pay postpetition claims without court approval. 

In addition, § 503 of the Bankruptcy Code governing the allowance 

of administrative claims is incorporated into Chapter 9 by § 901(a). 

Some uncertainty exists, however, concerning the scope and role of 

§ 503(b) (administrative expense claims) in a Chapter 9 case. The 

issue relates to the language of § 503(b), which speaks to “the actual, necessary costs of preserving the estate.” 11 U.S.C. § 503(b). As 

discussed at Part VI.B, there is no “estate” in a Chapter 9 case. As 

such, some courts have limited § 503(b) to expenses relating to the 

Chapter 9 case itself, and have excluded the debtor’s postpetition operating expenses. See, e.g., In re N.Y.C. Off-Track Betting Corp., 434 

B.R. 131 (Bankr. S.D.N.Y. 2010); Bank of N.Y. Mellon v. Jefferson 

Cty., Ala. (In re Jefferson Cty.), 2013 Bankr. LEXIS 2596 (Bankr. N.D. 

Ala. 2013). A Chapter 9 debtor also may voluntarily request that 

the judge grant an administrative expense claim in connection with 

postpetition financing under § 364. 11 U.S.C. §§ 364, 901. Moreover, 

§ 901 incorporates § 506(b), allowing a secured creditor to request 

the payment of postpetition interest, fees, and costs under certain 

circumstances. 

5. Identifying Key Stakeholders and Potential Conflicts of Interest

As explained at Part III.E, a variety of stakeholders may have an interest in the Chapter 9 case. These stakeholders may interact with 

a municipal debtor in several different capacities and/or have similar relationships with other solvent municipalities that factor into 
44

Navigating Chapter 9 of the Bankruptcy Code

their dealings with the debtor. For example, a creditor may hold both 

general obligation and revenue bonds; some of those bonds may be 

insured, limiting the creditor’s exposure on one issuance but not 

others; and the bond insurer may or may not be the real party in 

interest with respect to the insured issuance. The return objectives 

of creditors within the same bond issuance may differ depending 

on whether the creditor bought the bond at par or at a discount 

and whether the creditor holds any derivative positions related to 

the bonds. A creditor also may hold bonds of other municipalities 

that may experience financial distress. Similarly, the interests of the 

municipality’s active employees may be different than those of retirees, yet all may be participants in the same pension or other benefits 

plans. Moreover, the unions representing these employees may cover 

employees in other states and municipalities. The different interests 

of stakeholders likely will color their perspectives on issues in the 

case, whether they are focused just on the outcome of the pending 

case or considering how that outcome might affect their interests in 

other municipal cases. Disclosure of these interests to the judge and 

other parties early in the case may help move the case forward and 

may mitigate potential surprises at the plan confirmation stage. 

6. “First-Day” Orders

As discussed at Part VI.C, a Chapter 9 debtor does not need court 

approval to continue to pay prepetition or postpetition obligations 

or to continue its operation. Section 904, however, provides that the 

judge may enter an order affecting the debtor’s property or its governmental powers if the debtor consents to such action. Accordingly, 

a Chapter 9 debtor may ask the judge to approve certain transactions, including requests to make certain payments or to take certain 

actions that otherwise would typically be requested during the early 

days of a Chapter 11 case. A debtor may seek such a court order for 

a variety of reasons, including to mitigate political issues, encourage 

consensual resolution of disputed issues with creditors, and to resolve disputes with a party in interest that might otherwise arise in 

the context of, and potentially delay, plan confirmation. See, e.g., In 

re City of Stockton, Cal., 486 B.R. 194, 199 (Bankr. E.D. Cal. 2013) 

(“Hence, § 904 means that the City can expend its property and revenues during the chapter 9 case as it wishes. . . . When a chapter 9 

debtor files a Rule 9019 motion to have the court approve a compro-
45

V. The Beginning of the Case

mise or settlement, the municipality ‘consents’ for purposes of § 904 

to judicial interference with the property or revenues of the debtor 

needed to accomplish the proposed transaction.”).

G. Retention and Payment of Professionals

A debtor may employ professionals without court approval, and the 

judge reviews fees only within the context of plan confirmation. Sections 327 through 331 are not applicable in Chapter 9 cases. See 11 

U.S.C. § 901(a). There are two important caveats to this general rule: 

• First, § 1103(b) governing professionals appointed to represent an official committee of unsecured creditors applies in 

Chapter 9. Thus, “[a]n attorney or accountant employed to 

represent a committee appointed under section 1102 of [the 

Bankruptcy Code] may not, while employed by such committee, represent any other entity having an adverse interest in 

connection with the case.” See 11 U.S.C. § 1103(b). The Bankruptcy Code does not, however, mandate the debtors to pay a 

committee’s professionals’ fees or expenses. In cases where a 

committee is appointed, the debtor may consent to the payment of such fees and expenses, recognizing the value of being 

able to negotiate with a collective body representing diverse 

interests and perhaps having a supportive party in the plan 

process. A debtor may cap the aggregate amount of professionals’ fees and expenses that it will agree to pay in the case. 

• Second, the judge is authorized to review professional fees in 

connection with confirmation of a plan of adjustment. Specifically, § 943(b)(3) provides that the judge shall confirm the 

plan if “all amounts to be paid by the debtor or by any person 

for services or expenses in the case or incident to the plan have 

been fully disclosed and are reasonable.”

The extent of the judge’s authority under § 943(b)(3) is subject to 

debate. Specifically, a question exists under the statute concerning 

whether the judge’s review of fees for purposes of plan confirmation 

entails a review of all postpetition professionals’ fees or just those yet 

“to be paid” by the debtor or other person. Some judges have determined that the debtor is only obligated—and disclosures are only required—with respect to professional fees to be paid after confirmation. See In re Valley Health Sys., 381 B.R. 756, 765 n.10 (Bankr. C.D. 
46

Navigating Chapter 9 of the Bankruptcy Code

Cal. 2008); In re Cty. of Orange, Cal., 179 B.R. 195, 199–200 (Bankr. 

C.D. Cal. 1995). The debtor also may disclose more than future professionals’ fees, which the judge may decide to review in the context 

of plan confirmation. See In re Jefferson Cty., Ala., No. 11–05736 at 

42–43 (Bankr. N.D. Ala. Nov. 22, 2013) [ECF No. 2248] (“All the 

amounts disclosed by the County at or in connection with the Confirmation Hearing that have been paid or are to be paid for services 

or expenses in the Case or incident to the Plan are reasonable and 

have been paid and may appropriately be paid” by the debtor.). Other 

judges have required or inferred that § 943(b)(3) requires disclosure 

of all professionals’ fees incurred in connection with the case. See, 

e.g., In re City of Detroit, Mich., 524 B.R. 147, 208–10 (Bankr. E.D. 

Mich. 2014) (reviewing different approaches to review of professional fees in Chapter 9 cases). The judge in the Detroit case appointed a 

fee examiner to create a procedure for the submission and review of 

invoices of professionals to be paid by the city of Detroit, and to review those professional fees (see the related documents in the online 

repository), but then reviewed professional fees on an independent 

basis. Detroit, 524 B.R. at 210 (“The Court concludes that because its 

obligation under § 943(b)(3) is so closely linked to its obligation to 

determine whether the plan is fair and equitable, the Court simply 

cannot outsource this responsibility to the fee examiner.”). In addition, some judges have permitted the filing of interim fee applications by professionals during the pendency of the case.

H. Potential Tools for Managing the Case

Although the judge has a more limited role in a Chapter 9 case, the 

judge still may find it helpful or necessary to use certain tools to 

control the docket or to help the case, or litigated matters within 

the case, move forward. A judge invoking case-management tools 

in a Chapter 9 case should remain sensitive to the potential Tenth 

Amendment issues and whether the debtor consents to, or opposes, 

the use of such tools. (See Parts II, III.B, and III.C.) The following 

discussion highlights different approaches of judges to these issues 

and provides examples where helpful or available. 
47

V. The Beginning of the Case

1. Case-Management Orders

As a general matter, judges have the inherent authority to enter orders 

that enhance the efficiency of the cases before them. A case-management order may, among other things: establish a service list; specify 

the means and manner of service for serving or noticing parties on 

the service list; provide for omnibus hearings and procedures for 

particular kinds of hearings, such as hearings on motions for relief 

from the automatic stay; and address access to the docket, telephonic 

hearings, and other administrative matters. Judges have adopted different approaches to this particular issue. A collection of case-management orders is in the online repository. (Note: As discussed at 

Part IX.C, intercreditor issues may result in litigation external to the 

Chapter 9 case, but resolution of that litigation may be a prerequisite 

to plan confirmation. Courts should consider intercreditor issues, 

regulatory or electoral approvals, or other such nonbankruptcy matters that may impact the timing of the Chapter 9 case in structuring 

any case-management order.)

2. Scheduling Orders and Status Conferences

A judge may find value in entering a scheduling order governing the 

filing of the plan of adjustment and confirmation process, as well as 

any contested matters in the Chapter 9 case. Such a scheduling order 

could include filing deadlines, status conferences, and hearing dates. 

These kinds of orders may assist the parties in narrowing the issues, 

thereby avoiding stalemates in discussions or negotiations and possibly helping facilitate a more efficient resolution. In addition, pursuant to Bankruptcy Rule 7016, Civil Rule 16 applies in any adversary 

proceedings in the Chapter 9 case. A collection of scheduling orders 

is in the online repository.

3. Discovery Issues and Pretrial Orders

In addition to a general scheduling order, the judge may want to anticipate potential discovery disputes in adversary proceedings, contested matters, and any litigation concerning eligibility or confirmation of the plan of adjustment. Unlike a Chapter 11 debtor, a Chapter 

9 debtor is obligated to provide only limited financial and operational information with its petition. Because of a Chapter 9 debtor’s limited disclosure obligations, creditors may request additional infor-
48

Navigating Chapter 9 of the Bankruptcy Code

mation through discovery during the case. The judge should balance 

sovereignty issues and the debtor’s limited obligations under the 

Bankruptcy Code with the creditors’ need for additional information to address the particular matter in dispute. Judges have granted 

limited discovery to creditors in, among others, the following cases: 

In re City of Detroit, Mich., Case No. 13–53846 (Bankr. E.D. Mich. 

July 18, 2013) [ECF No. 642]; In re County of Orange, Cal., 179 B.R. 

185, 189 (Bankr. C.D. Cal. 1995). In addition, Bankruptcy Rule 2004 

applies in Chapter 9 cases, see, e.g., In re City of Vallejo, Cal., Case 

No. 08–26813 (Bankr. E.D. Cal. Aug. 9, 2010) [ECF No. 758], as do 

any state or local laws concerning public access to information.

4. Mediation

Some judges (e.g., in the Detroit, Vallejo, Stockton, and San Bernardino cases) have used mediation in Chapter 9 cases to help the parties 

reach a consensus, or at least narrow the issues, regarding the plan 

of adjustment. Such mediation can take a variety of forms. The judge 

may appoint another judge or former judge to serve as the mediator. 

Although third-party mediators also are available, the judge cannot 

compel the debtor to pay for such a mediator. The judge could use 

mediation for a particular issue in the case or, more globally, for facilitating the plan of adjustment. It is important that both the mediator and the parties understand the rules governing the mediation. 

These rules should address 

• the scope of the mediation; 

• the confidential nature of the mediation procedures; 

• what, if any, communications the mediator or any of the parties will have with the judge or others outside of the specific 

mediation; 

• the timetable for the mediation; 

• the use of discovery or the sharing of information among the 

mediator and parties to the mediation; and 

• the parties required to attend the mediation. 

Judges have adopted different approaches to the use of mediation. Some have ordered mediation of particular issues in the case. 

The judge in Detroit used a mediation team approach that assigned 
49

V. The Beginning of the Case

different mediators to oversee the debtor’s mediation with different 

creditor groups. In addition, in Stockton, the U.S. Court of Appeals 

for the Ninth Circuit appointed a bankruptcy judge from another 

district to serve as a judicial mediator in the case, with the power 

to enter orders on matters subject to the mediation. See In re City 

of Stockton, Cal., Case No. 12–32118 (Bankr. E.D. Cal. 2012) [ECF 

Nos. 384, 385], included in the online repository. 

The use of a sitting judge to mediate matters within a bankruptcy case implicates Canon  4A(4) of the Judicial Code of Conduct, 

which provides: “A judge should not act as an arbitrator or mediator or otherwise perform judicial functions apart from the judge’s 

official duties unless expressly authorized by law.” The Canon’s requirement that the judge’s official duties as mediator are “authorized 

by law” may be met by adopting a local rule pursuant to § 652(a) of the 

Alternative Dispute Resolution Act of 1998, 28 U.S.C. §§ 651–658, that 

establishes the use of judicial mediators. Another approach might 

be to enter a general administrative order to the same effect and 

some courts have concluded an appointment order is sufficient. For 

a local rule, see U.S. District Court for the District of Maine, Local 

Rule 83.11(c) (Court-Annexed ADR); for a general order, see Administrative Order Authorizing Judicial Mediation, U.S. Bankruptcy Court for the Eastern District of Michigan (Aug. 2, 2013); both 

documents are in the online repository. If the judge to be appointed 

as mediator is from outside the district, other requirements must be 

met. To ensure judicial mediators are acting with authority and with 

immunity, the court may wish to consult its circuit executive or the 

AO Office of the General Counsel.

The use of mediation is a fact-intensive determination made on 

a case-by-case basis. Mediation may not be appropriate or warranted 

in every Chapter 9 case. At least one judge has denied a party’s request for mediation concerning the debtor’s rejection of its proposal 

for reopening the debtor’s hospital. In re Palm Drive Health Care 

Dist., 14-10510 (Bankr. N.D. Cal., May 16, 2014) (Chapter 9 debtor 

opposed requested mediation). This order and the supporting and 

opposing briefs are in the online repository.
50

Navigating Chapter 9 of the Bankruptcy Code

VI. The Administration of the Case

The judge’s different role in a Chapter 9 case, as discussed at Part 

III.C, is apparent in the operational aspects of the case, as a Chapter 

9 debtor does not need the judge’s approval to continue to pay prepetition or postpetition obligations or to continue its operations. Rather, a Chapter 9 debtor can continue to conduct its affairs with less 

interruption from the bankruptcy process, other than in connection 

with the confirmation of its plan of adjustment and the assumption 

or rejection of executory contracts and unexpired leases. Some common aspects of bankruptcy cases during the administrative phase of 

the case are addressed below.

A. The Automatic Stay

The automatic stay is applicable in Chapter 9 cases. Two provisions, 

however, enlarge its scope. Section 922(a)(1) expands the automatic 

stay to prohibit actions against officers and inhabitants of the debtor if the action seeks to enforce a claim against the debtor. Section 

922(a)(2) prohibits attempts to enforce a “lien on or arising out of 

taxes or assessments owed to the debtor.” Those provisions prevent 

creditors (including other governmental units) from bringing mandamus actions to require the debtor to collect taxes and from bringing direct actions against taxpayers on behalf of the debtor to collect 

taxes or to enforce a tax lien imposed by the debtor. See, e.g., In re 

City of Stockton, Cal., 484 B.R. 372 (Bankr. E.D. Cal. 2012).

Section 922(d), on the other hand, narrows the scope of the 

stay with respect to special revenues. Under that subsection, neither 

the provisions of § 362 nor those of § 922(a) stay the “application 

of pledged special revenues in a manner consistent with section 

927. . . to payment of indebtedness secured by such revenues.” 11 

U.S.C. § 922(d) (note that the reference to § 927 is likely a reference 

to § 928 of the Bankruptcy Code, which addresses the continuation 

of a prepetition lien in special revenues); In re Jefferson Cty., Ala., 

474 B.R. 228, 269–71 (Bankr. N.D. Ala. 2012) (explaining legislative 

history and operation of §§ 922 and 928 of the Bankruptcy Code and 

holding that bondholders have the right to receive special revenues 

in the possession of the debtor during the case). Debt secured by 

special revenues can raise a number of issues in a Chapter 9 case 

beyond the automatic stay. For example, it is unclear whether such 
51

VI. The Administration of the Case

claims can be impaired or crammed down in the plan confirmation 

process. See also Parts VI.C (discussing special issues with special 

revenue bonds), VI.D (discussing avoidance actions and special revenue bonds), and VII.D (discussing confirmation issues with respect 

to special revenue bonds).

In addition, § 901(a) incorporates §§  555, 556, 557, 559, 560, 

561, and 562, which, by their own terms, except the unwinding of 

certain financial transactions from the automatic stay.

B. The Lack of an Estate

Section 541 (Property of the Estate) is not applicable in Chapter 

9 cases. To address instances in which the Bankruptcy Code uses 

“property of the estate” in a section applicable in a Chapter 9 case, § 

902 explains that “‘property of the estate’ means property of the debtor.” Notably, the jurisdictional provision of 11 U.S.C. §  1334(e)(1) 

does grant jurisdiction to the bankruptcy court over “property of the 

debtor.” The lack of an estate underscores the more limited role of the 

judge and U.S. trustee or bankruptcy administrator in the Chapter 

9 case—there is no estate or property of the estate for the judge to 

administer. 

C. The Continued Operation of the Debtor

In general, the Chapter 9 debtor may continue to operate as it did 

prior to the bankruptcy case, with little involvement from the judge 

or creditors. Indeed, the judge may not exercise jurisdiction over the 

debtor’s property because of § 904, among other reasons. The judge 

may, however, be called upon to address discovery disputes or issues 

under § 365. Similarly, the debtor may consent to or invoke the assistance of the judge to resolve issues otherwise subject to § 904—for 

example, to facilitate plan negotiations. The following explains the 

treatment of certain operational matters in a Chapter 9 case, particularly those that differ from a Chapter 11 case.

1. The Debtor as Limited-Purpose Trustee

Section 902(5) states that “trustee” when used in a section made applicable to Chapter 9 cases by § 103(f) or 901 means “debtor,” except 

as provided by § 926. 11 U.S.C. § 902(5).
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Navigating Chapter 9 of the Bankruptcy Code

2. Obtaining Postpetition Credit

A Chapter 9 debtor has the same power to obtain unsecured credit 

as it does outside of bankruptcy. Therefore, subsections (a) and (b) 

of § 364 are not made applicable to Chapter 9 cases because to do 

so would give the judge supervisory authority over the amount of 

unsecured debt the debtor incurs in its operation. The judge may become involved in these matters, however, when “the [debtor] needs 

special authority, such as subordination of existing liens, or special 

priority for the borrowed funds.” H.R. Rep. No. 95–595, at 394–95 

(1977). Thus, § 364(c)–(f) is made applicable to Chapter 9 cases. See 

11 U.S.C. § 901(a).

3. Postpetition Effect of a Security Interest; Special Issues with 

Special Revenue Bonds and Statutory Liens

Although § 901(a) incorporates § 552, § 928 limits its application. 

Section 928(a) states that a lien on special revenues acquired by the 

debtor after the commencement of the case cannot be avoided under 

§ 552(a). Section 552(a), in turn, provides, “Except as provided in subsection (b) of this section, property acquired by the estate or by the 

debtor after the commencement of the case is not subject to any lien 

resulting from any security agreement entered into by the debtor before the commencement of the case.” Accordingly, without the limitation set forth in § 928(a), a lien on special revenues might be avoided 

and a special revenue bond might be effectively turned into a general 

obligation bond. H.R. Rep. No. 100–1011, at 7–8 (1988). Nevertheless, 

§ 928(b) does subject special revenue bonds to the payment of certain 

operating expenses, stating, “Any such lien on special revenues, other than municipal betterment assessments, derived from a project or 

system shall be subject to the necessary operating expenses of such 

project or system, as the case may be.” Exactly what expenses constitute “necessary operating expenses” for purposes of § 928(b) may be 

disputed. See, e.g., In re Jefferson Cty., Ala., 503 B.R. 849 (Bankr. N.D. 

Ala. 2013) (discussing whether postpetition professional fees can be 

paid as “necessary operating expenses” under § 928(b)). 

Section 928(a) was enacted, in part, to avoid converting special 

revenue bonds into nonrecourse or general revenue bonds that could 

otherwise violate state constitutional or statutory debt limitations. It 

also is important to understand that the limitation in § 552(a) only
53

VI. The Administration of the Case

applies to consensual liens, i.e., “any lien resulting from any security 

agreement entered into by the debtor before the commencement of 

the case.” By its terms, § 552(a) does not apply to liens arising solely 

by force of statute. These so-called “statutory liens” arise automatically by force of law and are not based on or derived from a prepetition security agreement or other contract or judicial action. Thus, 

statutory liens are not cut off by § 552(a) and continue to attach to 

revenues or property postpetition. However, the § 922(d) exception 

to the automatic stay applies only to liens on “special revenues” and 

not to statutory liens. Although some municipal debtors have chosen to continue to pay statutory lien debt during the bankruptcy 

case, that outcome is not dictated by the Bankruptcy Code. The extent to which revenues subject to a statutory lien may be diverted by 

the debtor without providing “adequate protection” to bondholders 

during the case has yet to be adjudicated.

4. Limitation on Recourse; Special Issues with Special Revenue 

Bonds

Section 901(a) of the Bankruptcy Code adopts § 1111(b) as a provision of Chapter 9, but § 927 limits its application to ensure that nonrecourse revenue bonds cannot be converted under § 1111(b) into 

recourse or general obligation debt. See H.R. Rep. No. 100–1011, at 7 

(1988). Specifically, § 927 states, “The holder of a claim payable solely from special revenues of the debtor under applicable nonbankruptcy law shall not be treated as having recourse against the debtor 

on account of such claim pursuant to section 1111(b) of this title.”

5. Sales of Assets

Chapter 9 does not incorporate § 363. As such, a Chapter 9 debtor 

can sell assets outside of the bankruptcy process in accordance with 

applicable nonbankruptcy law, or it can sell assets—typically major assets—under the plan of adjustment. Section 901 incorporates 

§ 1123(a)(5)(D), which allows the debtor to sell assets free and clear 

of liens under the plan. As discussed at Part VII.D, a debtor must 

consider—and obtain any regulatory or electoral approvals required 

by—applicable nonbankruptcy law in connection with plan confirmation. See, e.g., 11 U.S.C. § 943(b)(4), (6); Parts VII.D (discussing 

plan confirmation process), VIII.D (discussing hospital sale under 

Chapter 9 plan). 
54

Navigating Chapter 9 of the Bankruptcy Code

6. Executory Contracts and Unexpired Leases

With court approval, a Chapter 9 debtor may assume or reject executory contracts and unexpired leases, as may a debtor in Chapter 11. 

11 U.S.C. §§ 365, 901(a). However, a lease to a debtor “shall not be 

treated as an executory contract or unexpired lease for the purposes 

of section 365 or 502(b)(6)” solely because the agreement is subject 

to termination if rent is not appropriated by the debtor. 11 U.S.C. 

§  929. Section 929 recognizes the potential that a municipality is 

party to a financing lease rather than a true lease. As the legislative 

history explains, “[S]ection . . . 929 bring[s] treatment of municipal 

leases in bankruptcy into conformity with how such leases are treated and used in the world of municipal finance . . . [S]ection 929 says 

that a lease to a municipality shall not be treated as an executory 

contract or unexpired lease that could be subject to assumption or 

rejection under section 365, or that could give rise to a claim for 

damages limited by section 502(b)(6), just because it is subject to 

termination in the event the [municipal] debtor fails to appropriate 

rent.” See H.R. Rep. No. 100-1011, 100th Cong., 2d Sess. 8 (1988).

7. Collective Bargaining Agreements and Retiree Benefits

Section 901(a) does not make sections 1113 and 1114 applicable to 

Chapter 9 cases. As a result, the judges in the San Bernardino and the 

Vallejo cases concluded that § 365 of the Bankruptcy Code governs 

the Chapter 9 debtor’s proposed treatment of collective bargaining 

agreements and retiree benefits. See, e.g., In re City of Vallejo, Cal.,

403 B.R. 72, 78–79 (Bankr. E.D. Cal. 2009), aff’d, 432 B.R. 262 (E.D. 

Cal. 2010); In re City of San Bernardino, Cal., 530 B.R. 474, 480–

82 (C.D. Cal. 2015). Consequently, a Chapter 9 debtor may seek to 

reject collective bargaining agreements without going through the 

procedures provided in § 1113, and also may reject retiree benefit 

plans without complying with the procedure in § 1114.

Judges confronting a Chapter 9 debtor’s request to reject a collective bargaining agreement have been guided by the Supreme Court’s 

decision in N.L.R.B. v. Bildisco & Bildisco, 465 U.S. 513 (1984). Bildisco provides that, in evaluating a debtor’s request under § 365, the 

judge should consider whether “the collective-bargaining agreement 

burdens the estate, and that after careful scrutiny, the equities balance 

in favor of rejecting the labor contract.” Id. at 526. The bankruptcy 
55

VI. The Administration of the Case

court “should be persuaded that reasonable efforts to negotiate a voluntary modification have been made and are not likely to produce 

a prompt and satisfactory solution.” Id. See also San Bernardino, 530 

B.R. at 480–82 (relying on Bildisco and authorizing rejection of collective bargaining agreement); In re City of Vallejo, Cal., 432 B.R. 

262 (E.D. Cal. 2010) (affirming bankruptcy court’s order authorizing 

debtor’s rejection of collective bargaining agreement). Questions remain, however, concerning the limitations of a municipality’s ability to unilaterally reject a collective bargaining agreement, as well as 

the evidence necessary to support a rejection determination under 

§ 365. See, e.g., Vallejo, 432 B.R. at 273–75; In re Cty. of Orange, 179 

B.R. 177, 182–83 (Bankr. S.D. Cal. 1995).

Judges also may face requests concerning a debtor’s proposed 

modification of a collective bargaining agreement or retiree benefits 

prior to a formal request to reject the underlying agreement. At least 

one judge has determined that he did not have authority to require 

the Chapter 9 debtor to continue to pay retiree benefits. See In re City 

of Stockton, Cal., 478 B.R. 8 (Bankr. C.D. Cal. 2012) (discussing issues 

raised by request to require payments, including § 904’s restriction on 

the bankruptcy court’s ability to interfere with the debtor’s property or 

revenue). In addition, at least one bankruptcy judge and one district 

judge have determined that the automatic stay applies to a prepetition 

action concerning the debtor’s alleged breach of a memorandum of 

understanding with a labor union. See San Bernardino, 530 B.R. at 

489 (affirming bankruptcy court’s decision denying union’s request 

for relief from stay). As with most decisions in Chapter 9 cases, the 

judge should be aware of the issues that might arise and be sensitive 

to the competing issues at play, including the potential Tenth Amendment issues discussed above. (See Parts II, III.B, and III.C.)

Moreover, issues concerning relations between the Chapter 9 

debtor and its labor unions and retirees may arise during the eligibility determination at the beginning of the Chapter 9 case. Specifically, 

the judge may be asked to determine whether the debtor negotiated 

in good faith with its labor unions and retirees prior to filing the 

Chapter 9 case. See, e.g., In re City of Detroit, Mich., 504  B.R. 97 

(Bankr. E.D. Mich. 2013); In re City of Stockton, Cal., 493 B.R. 772 

(Bankr. E.D. Cal. 2013).
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Navigating Chapter 9 of the Bankruptcy Code

8. Pension-Specific Issues

In addition to the §§ 1113 and 1114 employee-related issues previously discussed, unique and challenging issues may arise in connection with a Chapter 9 debtor’s pension obligations. Most public employees are entitled to receive some form of pension payments—i.e., 

retirement income typically based on years of service or other qualifications established by the municipality or state—from the Chapter 

9 debtor. See Part III.F (discussing nature of public pension plans). 

Such pension obligations may be protected by state or local law 

through constitutional and statutory restrictions on modifications 

to the pension plans, the recognition of a property right in the pension that cannot be modified without due process of law, or similar structures intended to secure the payment of pensions to public 

employees. (Note: Issues also may exist concerning whether OPEBs 

are pension obligations.) These protections make it very difficult for 

municipalities to modify or reduce their pension obligations outside 

of a Chapter 9 case, and such protections may present obstacles in 

the Chapter 9 case as well. They also evidence a policy at the state or 

local level to prioritize payments to public employees.

A Chapter 9 debtor may be able to achieve some structural 

changes to its pension plans prepetition, such as by increasing the 

retirement age to require employees to work longer before receiving 

pension payments and adjusting the formula for calculating pension 

payments (e.g., basing payments on an average salary over a certain 

period, rather than the last year of service). See, e.g., In re City of 

Stockton, Cal., 493 B.R. 772, 779–80 (Bankr. E.D. Cal. 2013) (explaining prepetition steps taken by city with respect to its pension 

plans). These changes, however, may not be adequate to address the 

debtor’s projected shortfall. And unlike private employers’ pension 

plans, public pension plans are not protected by the Employee Retirement Income Security Act of 1974 (ERISA) or backstopped by 

the Pension Benefit Guaranty Corporation. The treatment of a debtor’s pension obligations thus can be an important and controversial 

issue in the Chapter 9 case. 

Whether and to what extent a Chapter 9 debtor can modify its 

pension obligations is subject to different approaches. The judge in 

the Detroit case held that the debtor’s pension obligations were subject to impairment in the Chapter 9 case despite state constitutional 

or statutory protections for the same. See In re City of Detroit, Mich., 
57

VI. The Administration of the Case

524 B.R. 147, 211 (Bankr. E.D. Mich. 2014). See also In re City of 

Stockton, Cal., 526 B.R. 35, 50–55 (Bankr. E.D. Cal. 2015) (discussing potential impairment of contract with CalPERS). A debtor may 

not, however, want to use the Chapter 9 process to impair pension 

obligations for a variety of reasons. Moreover, a judge may confront 

certificates of obligation issued by the debtor prepetition to fund its 

pension obligations, which essentially are bonds that shift part of the 

risk of underfunded pension obligations away from employees and 

to the bondholders. Some courts treat such bonds separately from 

the underlying pension obligations. See In re City of Stockton, Cal., 

542 B.R. 261 (9th Cir. BAP 2015) (discussing separate classification 

and treatment of bondholder’s claim).

9. Settlements

Bankruptcy Rule 9019 provides, “On motion by the trustee and after 

notice and a hearing, the court may approve a compromise or settlement.” At least one judge has determined that a Chapter 9 debtor 

does not need to seek approval of settlements reached during the 

Chapter 9 case, even with respect to disputed issues. See In re City 

of Stockton, Cal., 486 B.R. 194 (Bankr. E.D. Cal. 2013). This result 

stems, in part, from the failure of Chapter 9 to incorporate § 363 of 

the Bankruptcy Code and the procedural nature of Bankruptcy Rule 

9019. Id. Nevertheless, as discussed at Part V.F (discussing debtor 

consent to court action), a Chapter 9 debtor may request court approval of a settlement, particularly those resolving potential impediments to confirmation of the plan of adjustment. Despite this ability, 

one should consider whether the judge is prepared to approve the 

settlement preconfirmation when the plan is likely to encompass the 

same terms as the settlement. See Detroit, 524 B.R. at 257–58. 

D. The Chapter 5 Avoiding Powers 

Section 926(a) provides that the judge may appoint a trustee if the 

debtor refuses to pursue a cause of action under § 544, 545, 547, 

548, 549(a), or 550 for the limited purpose of pursuing such cause of 

action. The statute expressly requires that such appointment be “on 

the request of a creditor” and thus arguably does not permit appointment of a trustee sua sponte. See 11 U.S.C. § 926(a); In re N.Y.C. Off-
58

Navigating Chapter 9 of the Bankruptcy Code

Track Betting Corp., 2011 WL 309594 at *4 (Bankr. S.D.N.Y. 2011) 

(questioning role of trustee in light of § 904).

Section 926(b) bars the avoidance, pursuant to § 547, of transfers 

made “to or for the benefit of any holder of a bond or note, on account of such bond or note.” Although the terms “bond” and “note” 

are included in the definition of “security” in § 101, neither is defined. The legislative history suggests that the limitation in § 926(b) 

was intended to protect special revenue bonds, but there is nothing 

in the statute that restricts avoidance to such bonds. See H.R. Rep. 

No. 100–1011, at 4121 (1988). 

E. The Claims Process 

As in a Chapter 11 case, one objective of a Chapter 9 case is to identify creditors holding claims against the debtor and to provide for the 

treatment of those claims under the plan. Key aspects of the Chapter 

9 claims process are listed below, noting some similarities and differences with the process in Chapter 11. 

1. List of Creditors

Section 924 requires the debtor to file a list of creditors as prescribed by Federal Rule of Bankruptcy Procedure 1007. Bankruptcy 

Rule 1007(a)(1) requires the debtor to “file with the petition a list 

containing the name and address of each entity included or to be 

included on Schedules D, E/F, G, and H . . .” In addition, Bankruptcy 

Rule 1007(d) requires the debtor to file a list of the creditors with 

the twenty largest unsecured claims, excluding insiders. This information is needed in connection with the possible appointment of a 

creditors’ committee under § 1102, made applicable to Chapter 9 by 

§ 901.

2. Creditors Affected by Adjustment of Assessments

If a proposed plan requires a revision of assessments such that the 

proportion of special assessments or special taxes to be assessed 

against some real property will be different from the proportion in 

effect on the date the petition is filed, the debtor must also file, pursuant to Bankruptcy Rule 1007(e), a list showing the name and address 

of each known holder of title, legal or equitable, to real property ad-
59

VI. The Administration of the Case

versely affected. On motion, the judge may modify the requirements 

of Bankruptcy Rule 1007(a) and (e).

3. Proofs of Claim

Section 901(a) makes § 501 applicable in Chapter 9 cases. As in 

Chapter 11, many creditors may not be required to file a proof of 

claim in a Chapter 9 case. A proof of claim is deemed filed under 

§ 501 for any claim that appears on the list of creditors filed by the 

debtor, except a claim that is listed as disputed, contingent, or unliquidated. 11 U.S.C. § 925. Creditors whose claims are listed as disputed, contingent, or unliquidated or are not listed at all must file 

proofs of claim to be treated as creditors with respect to such claims 

for purposes of voting and distribution. Fed. R. Bankr. P. 3003(c)(2). 

“Any creditor or indenture trustee may file a proof of claim . . .” Fed. 

R. Bankr. P. 3003(c)(1). Disputed, contingent, or unliquidated claims 

must be filed within the time fixed by the judge—this time frame 

may be extended for cause. Fed. R. Bankr. P. 3003(c)(2)–(3). Even if 

the time has expired, a proof of claim may be filed to the extent and 

under the conditions set forth in Bankruptcy Rule 3002(c)(2)–(4) 

and (6). Not less than twenty-one days’ notice of the time fixed for 

filing proofs of claim must be given by mail to the debtor, the trustee, 

all creditors, and indenture trustees. Fed. R. Bankr. P. 2002(a)(7) & 

3003(c)(3).

4. Claims Bar Date

If the debtor applies for a claims bar date at the time of the filing of the 

petition and the request is granted, notice of the established claims 

bar date can be included in the initial notice of the commencement 

of the case. See, e.g., D. Neb. L. Bankr. R. 2080–1(A)(2).

5. Notice and Discharge

Despite the notice requirements in Bankruptcy Rules 2002 and 3003, 

it has been held that although creditors did not receive notice that 

all claims were listed as disputed, contingent, or unliquidated, they 

were barred from participating in distribution because they had 

actual knowledge of the case before the plan was confirmed. Nebraska Sec. Bank v. Sanitary & Improvement Dist. No. 7, 119 B.R. 

193, 195 (D. Neb. 1990). The judge reasoned that in contrast to oth-
60

Navigating Chapter 9 of the Bankruptcy Code

er discharge provisions in the Bankruptcy Code, § 944(c)(2) does 

not require creditors to have a reasonable opportunity to file timely 

proofs of claim prior to confirmation and that the only limitation on 

discharge in Chapter 9 is for those obligations owed to creditors who 

did not have notice or actual knowledge of the case before confirmation. Id. The judge also held that the creditors’ constitutional right 

to due process was not violated because they had an opportunity to 

be heard at a meaningful time. Once the opportunity had presented 

itself, it was the responsibility of the creditors to make whatever inquiry and/or response necessary to protect their claims. Id. See also

Holmon v. Vill. of Alorton, 66 N.E.3d 841 (Ill. App. Ct. 5th Dist. 

2016) (“A bankruptcy plan operates as an absolute settlement, and 

the failure to pay unpaid obligations created by the plan will not revive the old debts.”). 

VII. The End of the Case: Plan Confirmation, 

Postconfirmation, and Dismissal Issues

Judges generally recognize that “[t]he purpose of reorganization under Chapter 9 is to allow municipalities created by state law to adjust 

their debts through a plan voted on by creditors and approved by the 

Bankruptcy Court.” In re Mount Carbon Metro. Dist., 242 B.R. 18, 

32 (Bankr. D. Colo.1999). The Chapter 9 plan process mirrors the 

Chapter 11 process in several key respects, including the disclosure 

statement and solicitation process. Some differences, however, exist. 

For example, in Chapter 9 only the debtor may file or modify a plan, 

and § 943 of the Bankruptcy Code imposes additional confirmation 

requirements. In addition, not every Chapter 9 debtor will be able 

to achieve confirmation of a plan. In those instances, the judge may 

need to consider grounds supporting dismissal of the case. Each of 

these issues is addressed in further detail below. 

A. The Plan Proponent

Section 941 of the Bankruptcy Code provides that the debtor “shall” 

file a plan. Section 1121 is not incorporated into Chapter 9 and there 

is no provision similar to § 1121 that would allow creditors or other 

parties in interest to file a plan. The plan may be filed with the petition or at a later time fixed by the judge. 11 U.S.C. § 941. The remedy 
61

VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

if a debtor does not timely file a plan is dismissal of the case. 11 

U.S.C. § 930(a)(3).

Section 942 provides that the debtor (and implicitly no other 

party) may modify a plan at any time before confirmation. See Fed. 

R. Bankr. P. 3019(a). In addition, § 901(a) incorporates § 1127(d) 

providing that creditors’ votes in favor or against a plan continue to 

apply to the modified plan unless the vote is changed by the courtestablished deadline. For a discussion of a debtor’s ability to modify 

a plan postconfirmation, see Part VII.E. 

B. The Disclosure Statement 

Section 901(a) adopts the disclosure statement provisions of § 1125 

in their entirety. Federal Rules of Bankruptcy Procedure 2002, 3016, 

and 3017 set forth related requirements and procedures. Consequently, the Chapter 9 disclosure statement and solicitation process 

is akin to that in a Chapter 11 case.

C. Objections to Confirmation

Objections to confirmation of the plan must be filed with the clerk 

and served on the debtor, on any committee appointed under § 1102, 

and on any entity designated by the judge, within a time fixed by the 

judge. Fed. R. Bankr. P. 3020(b)(1). A copy of the objection need not 

be transmitted to the U.S. trustee or bankruptcy administrator in 

Chapter 9 cases. Id. An objection to confirmation is deemed to be a 

contested matter governed by Federal Rule of Bankruptcy Procedure 

9014. Id.

Section 943(a) provides that a “special tax payer” may object to 

confirmation of a plan. A special tax payer is a “record owner or 

holder of legal or equitable title to real property against which a special assessment or special tax has been levied the proceeds of which 

are the sole source of payment of an obligation issued by the debtor 

to defray the cost of an improvement relating to such real property.” 11 U.S.C. § 902(3). The right of a special tax payer to object to 

confirmation is in addition to the rights of other parties in interest 

to appear and be heard on any issue in the case, including confirmation, because § 901(a) makes §§ 1109 and 1128 applicable in Chapter 

9 cases. 
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Navigating Chapter 9 of the Bankruptcy Code

D. The Confirmation Process 

After notice, the judge must hold a hearing on the confirmation 

of a Chapter 9 plan. 11 U.S.C. §§ 901(a), 1128(a); Fed. R. Bankr. P. 

3020(b)(2). This part of the manual discusses the general standards 

governing plan confirmation, as well as some procedural and substantive issues that may arise in the process.

The standards for plan confirmation are a combination of the 

Chapter 9-specific requirements of § 943(b) and those portions of 

§  1129 made applicable by § 901(a). In addition, the plan confirmation process may require the judge to consider the interplay of 

federal and state law. For example, similar to confirmation under 

Chapter 11, a Chapter 9 debtor must propose the plan “in good faith 

and not by any means forbidden by law.” 11 U.S.C. § 1129(a)(3) (incorporated by § 901(a)). In addition, § 943(b) states that the court 

shall confirm a plan if, among other things, applicable law does not 

prohibit the debtor from carrying out the plan and any regulatory 

or electoral approvals required to carry out the plan have been (or 

will be) obtained. Thus, for example, if the plan is predicated on revenue raise, state law often dictates the process for approving such a 

revenue raise, which often requires a vote of the public. If state and 

federal law conflict, the judge may have to make a determination 

regarding preemption. See In re Cty. of Orange, Cal., 191 B.R. 1005, 

1018–23 (Bankr. C.D. Cal. 1996) (holding that state statute dictating 

priority of distribution of property held in trust by Chapter 9 debtor 

conflicted with and thus was preempted by federal bankruptcy law 

on the rationale that state legislatures cannot create bankruptcy priorities); see also In re Sanitary & Improvement Dist. #7 of Lancaster 

Cty., Neb., 98 B.R. 970, 974–75 (Bankr. D. Neb. 1989) (denying confirmation of Chapter 9 plan because it did not provide that bondholders would be paid in full prior to payment to warrant holder, as 

required by state law).

Section 943(b) of Title 11 provides that 

the court shall confirm the plan if:

(1) the plan complies with the provisions of this title 

made applicable by sections 103(e) and 901 . . . ; 

(2) the plan complies with the provisions of [Chapter 9];
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VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

(3) all amounts to be paid by the debtor or by any person 

for services or expenses in the case or incident to the plan 

have been fully disclosed and are reasonable;

(4) the debtor is not prohibited by law from taking any 

action necessary to carry out the plan;

(5) except to the extent that the holder of a particular 

claim has agreed to a different treatment of such claim, 

the plan provides that on the effective date of the plan 

each holder of a claim of a kind specified in section 

507(a)(2) . . . will receive on account of such claim cash 

equal to the allowed amount of such claim;

(6) any regulatory or electoral approval necessary under 

applicable nonbankruptcy law in order to carry out any 

provision of the plan has been obtained, or such provision is expressly conditioned on such approval; and

(7) the plan is in the best interests of the creditors and is 

feasible.

11 U.S.C. § 943(b). For a discussion of § 943(b)(3) and the approval 

of professionals’ fees, see Part V.G. In addition, under § 901(a) the 

following sections apply in Chapter 9 cases: § 1129(a)(2), (3), (6), 

(8), and (10), and § 1129(b)(1), (2)(A), and (2)(B).

In applying the foregoing standards to evaluate confirmation of 

a plan of adjustment, the judge may confront one or more of the 

following issues.

1. Classification of Claims

Section 1122(a) applies in a Chapter 9 case. Claims classification 

can be challenging in a Chapter 9 case. Specifically, courts often face 

three kinds of issues. First is the effect of § 901, which only incorporates one category of administrative expense claims, i.e., § 507(a)(2). 

Does this mandate only one class of administrative expense claims 

(i.e., § 507(a)(2) claims) or can the debtor separately classify other 

priority claims? See, e.g., In re Cty. of Orange, Cal., 191 B.R. 1005, 

1020 (Bankr. C.D. Cal. 1996) (explaining that “there are valid reasons 

why Congress only incorporated § 507(a)[(2)] into chapter 9, and 

those reasons do not lead to the conclusion that Congress intended 

to eliminate federal priorities under chapter 9”). Second is whether the debtor can classify all general unsecured claims in one class, 
64

Navigating Chapter 9 of the Bankruptcy Code

even though some claimants are bondholders, some are retirees, and 

some are other types of unsecured creditors. See, e.g., In re City of 

Stockton, Cal., 542 B.R. 261 (9th Cir. BAP 2015) (rejecting creditor’s 

argument that the debtor was required to classify its unsecured claim 

separate from other general unsecured claims). Third is whether the 

debtor can classify general unsecured creditors separately, including different treatment for creditors who settle and those who do 

not. See, e.g., In re City of Detroit, Mich., 524 B.R. 147 (Bankr. E.D. 

Mich. 2014); In re Stockton, 542 B.R. at 280–83 (discussing separate 

classification and treatment of bondholder’s claim). Courts generally 

have allowed separate classification if it is reasonable or supported 

by a business or economic justification. See, e.g., In re City of Colo. 

Springs Spring Creek Gen. Improvement Dist., 187 B.R. 683 (Bankr. 

D. Colo. 1995) (reviewing two different approaches to § 1122(a)—

one that requires justification for separate classification and one that 

permits it as a general matter—and finding the latter approach more 

consistent with statutory language; citing cases). At least one court 

has, however, determined that the Bankruptcy Code preempts any 

state or local law priorities for claims that conflict with the Bankruptcy Code. See Cty. of Orange, 191 B.R. 1005.

2. Good Faith

Section 1129(a)(3) applies in a Chapter 9 case, requiring that the 

plan “be proposed in good faith and not by any means forbidden 

by law.” 11 U.S.C. § 1129(a)(3). Courts generally consider all factors 

relevant to the debtor’s proposed plan of adjustment in assessing the 

debtor’s good faith. See, e.g., In re City of Detroit, Mich., 524 B.R. 

147, 248 (Bankr. E.D. Mich. 2014) (explaining that inquiry focuses on issues pertinent to plan but includes the “‘totality of the circumstances,’ and the court’s own ‘common sense and judgment’”). 

As explained by one court, the guiding principle is “that a Chapter 

9 plan proposed in good faith must treat all interested parties fairly 

and that the efforts used to confirm the plan must comport with due 

process.” In re Mount Carbon Metro. Dist., 242 B.R. 18, 39 (Bankr. 

D. Colo. 1999).
65

VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

3. Not Prohibited by State Law

Section 943(b)(4) focuses on whether the debtor is prohibited by 

state, local, or other nonbankruptcy law from taking actions necessary to implement the plan. Accordingly, the judge should review 

any actions of the debtor proposed under, or in connection with, 

the plan of adjustment, including new financing, to ensure that 

applicable law does not prohibit the debtor from carrying out the 

plan. See In re Sanitary & Improvement Dist. #7 of Lancaster Cty., 

Neb., 98 B.R. 970 (Bankr. D. Neb. 1989); 11 U.S.C. § 943(b)(4). The 

Bankruptcy Code may preempt, however, certain aspects of applicable nonbankruptcy law. See, e.g., In re Detroit, 524 B.R. at 211–12 

(explaining that a plan could impair unsecured pension obligations 

under § 1123(b)(1), notwithstanding § 943(b)(4)).

4. Regulatory or Electoral Approval

Section 943(b)(6) speaks to the implementation of the plan and requires the debtor to obtain any regulatory or electoral approvals required by state or local law to carry out any provision of the plan. As 

noted above, this could include compliance with state or local law 

processes for the approval of revenue raises necessary to implement 

the plan.

5. Best Interests and Feasibility Requirements

Section 943(b)(7) requires that the proposed plan is “in the best interests of creditors and is feasible.” 11 U.S.C. § 943(b)(7). According 

to one case, the “‘best interests’ test acts as a floor requiring a reasonable effort at payment of creditors by the municipal debtor and that 

the ‘feasibility’ requirement sets a corresponding ceiling which prevents the Chapter 9 debtor from promising more than it can deliver.” 

In re Mount Carbon Metro. Dist., 242 B.R. 18, 34 (Bankr. D. Colo. 

1999). Each element raises potential issues in the Chapter 9 context.

“Best interests of creditors” is not defined for purposes of Chapter 9. In Chapter 11, a plan is said to be in the best interests of creditors if creditors would receive at least as much under the plan as 

they would if the debtor were liquidated under Chapter 7. 11 U.S.C. 

§ 1129(a)(7)(A)(ii). Courts generally have refused to apply the same 

definition in the Chapter 9 context because § 1129(a)(7) is not incorporated into Chapter 9 and liquidation is not available to the Chapter 
66

Navigating Chapter 9 of the Bankruptcy Code

9 debtor. See, e.g., In re City of Stockton, Cal., 542 B.R. 261, 270 (9th 

Cir. B.A.P. 2015). A similar but less extreme definition of the best 

interest of creditors test is that a Chapter 9 debtor’s plan must pay 

creditors more than they would receive if the case were dismissed, 

which would permit “every creditor to fend for itself in the race to 

obtain the mandamus remedy and to collect the proceeds.” 6 Collier 

on Bankruptcy ¶ 943.03[7][a] (16th ed. 2017). See also In re City of 

Detroit, Mich., 524 B.R. 147, 213 (Bankr. E.D. Mich. 2014) (“Courts 

generally agree that the best interests of creditors test in § 943(b)(7) 

requires ‘that a proposed plan provide a better alternative for creditors than what they already have.’”) (citations omitted). Moreover, 

although creditors often argue that the best-interests-of-creditors 

test should be applied on a creditor-by-creditor basis, courts generally have performed the analysis on a class basis. See In re Stockton,

542 B.R. at 283 (“By its terms, the ‘best interests’ test in Chapter 9 is 

collective rather than individualized, and that interpretation is supported by the very context of chapter 9.”).

Despite the differences between the Chapter 9 and the Chapter 11 statutory language, it is suggested that a best-interests objection may be asserted by a dissenting creditor in a class that has 

otherwise accepted the Chapter 9 debtor’s plan. 6 Collier on Bankruptcy ¶ 943.03[7] (16th ed. 2017). This approach affords statutory 

protection to dissenting members of an accepting impaired class and 

is similar to the § 1129(a)(7) objection, which is available to a dissenting creditor of a class that has accepted a Chapter 11 plan.

Section 943(b)(7) also requires that the proposed plan be feasible. The Chapter 11 formulation of feasibility in § 1129(a)(11) is 

not incorporated into Chapter 9. In evaluating a plan’s feasibility, the 

judge must determine whether the revenue and expense projections 

submitted by the debtor are reasonable and whether, based on those 

numbers, the debtor should be able to make payments called for under the plan while also continuing to provide services to the public. See In re Mount Carbon Metro. Dist., 242 B.R. 18, 35 (Bankr. D. 

Colo. 1999) (reasoning that a finding of feasibility in a Chapter 9 case 

“should prevent confirmation of visionary schemes which promise 

creditors . . . more under a proposed plan than the debtor can possibly attain after confirmation . . . this requires a practical analysis 

of whether the debtor can accomplish what the plan proposes and 

provide governmental services”) (internal quotations and citations 
67

VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

omitted); see also H.R. Rep. No. 94–686, at 571 (1977); In re City 

of Detroit, Mich., 524 B.R. 147, 219 (Bankr. E.D. Mich. 2014) (explaining the unique challenges under the feasibility requirement in 

Chapter 9 cases, including that the debtor must not only be able to 

repay its creditors in accordance with the plan, but also continue to 

provide public services).

6. Cramdown

A Chapter 9 debtor may seek confirmation of its plan under the 

cramdown provisions of § 1129(b) if the plan satisfies the requirements of § 1129(a) (other than subsection (a)(8)) and has been accepted by at least one class of impaired claims. As in the Chapter 11 

context, § 1129(b) requires that the Chapter 9 plan of adjustment 

be “fair and equitable” with respect to each class of impaired claims. 

Section 1129(b)(2)(A) and (B) define “fair and equitable” for secured 

and unsecured claims, respectively. Nevertheless, the fair and equitable determination may present different issues in a Chapter 9 case, as 

compared to a Chapter 11 case, because of the inability to liquidate 

a municipality, the limited markets in which to sell municipal assets, 

valuation issues generally, and different terms and expectations in 

the municipal bond market. 

Under § 1129(b)(2)(A), the judge must determine that the 

plan provides one of the following for secured claims: (1) deferred 

cash payments equal to the present value of the creditor’s collateral; 

(2) the sale of the collateral, with a lien in proceeds and cash payments equal to the present value of the creditor’s collateral; or (3) the 

indubitable equivalent of the secured claim. The judge must ascertain the present value of the revenue stream associated with revenue 

bonds, including special revenue bonds. As with most valuation issues, there is no one generally accepted valuation methodology for 

revenue streams associated with revenue bonds. Rather, the judge 

will make the determination and evaluate the proposed treatment 

of the secured claim against that valuation. In addition, with respect 

to special revenue bonds, it is unclear whether, and to what extent, 

such bonds can be impaired through the cramdown process. See also

Part VI.A (discussing automatic stay and special revenue bonds).

Under § 1129(b)(2)(B), the fair and equitable determination 

may entail a more general assessment of the proposed treatment for 

unsecured creditors. Municipal cases do not involve traditional eq-
68

Navigating Chapter 9 of the Bankruptcy Code

uity interests against which to compare the treatment of unsecured 

creditors. The absolute priority rule does apply, however, with respect to different tranches of unsecured debt. In addition, judges 

tend to consider factors such as whether “the amount to be received 

by the bondholders is all that they can reasonably expect in the circumstances.” Lorber v. Vista Irrigation Dist., 127 F.2d 628, 629 (9th 

Cir. 1942) (citations omitted). 

7. Use of Court-Appointed Experts

Each judge should assess the need for, and use of, any court-appointed

experts based on the circumstances of the particular case. The use of 

an independent court-appointed expert may be helpful, for example, in situations in which the quality of the information available 

from the debtor is poor or untimely, the nature of the prefiling negotiations or interactions with stakeholders has been antagonistic or 

unproductive, and/or there has been a general lack of transparency 

around the debtors’ operations, activities, and financial condition. 

The court-appointed expert may facilitate better and more timely information, which may assist progress in the case and with resolving 

plan confirmation issues.

The judge may invoke Rule 706 of the Federal Rules of Evidence 

to appoint an expert witness to assess these or other specifically 

identified matters for the judge. Evidence Rule 706 provides, “On 

a party’s motion or on its own, the court may order the parties to 

show cause why expert witnesses should not be appointed and may 

ask the parties to submit nominations. The court may appoint any 

expert that the parties agree on and any of its own choosing.” It is 

made applicable in bankruptcy cases by Federal Rule of Bankruptcy 

Procedure 9017. Judges have used Evidence Rule 706 witnesses for 

valuation issues in Chapter 9 and Chapter 11 cases. See, e.g., In re 

Gainy Corp., 400 B.R. 576 (Bankr. W.D. Mich. 2008) (reviewing the 

use of Evidence Rule 706 in bankruptcy cases and ordering the appointment of such witness). 

In evaluating the use of an expert witness under Evidence Rule 

706, the judge should consider, among other things, the appropriate 

process for identifying and retaining the expert, the scope of the expert’s assignment, how the judge will use the information produced 

by the expert and who will have access to it, whether parties will be 

able to cross-examine the expert witness, who will pay for the expert’s 
69

VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

services, and other issues potentially impacting the use of an expert 

witness. Evidence Rule 706 answers some of these questions, such 

as the ability of parties to depose and cross-examine an expert witness, as well as the payment of such witness’s fees by the parties. Fed. 

R. Evid. 706(b), (c). Other questions are not specifically addressed 

and judges have adopted different approaches to these issues. For an 

example of an appointment under Evidence Rule 706, see In re City 

of Detroit, Mich., No. 13–53846 [ECF No. 4215 and 4747] (Bankr. 

E.D. Mich. Apr. 22, 2014) (order appointing expert under Evidence 

Rule 706, and order supplementing the appointment), included in 

the online repository.

In addition, at least one court has appointed an unpaid finance 

expert as a non-testifying consultant to the court who was not subject to the requirements of Evidence Rule 706. See In re City of Detroit, Mich., No. 13–53846 [ECF No. 4216] (Bankr. E.D. Mich. Apr. 

22, 2014) (order appointing expert as “the Court’s consultant on 

issues of municipal finance and viability”), included in the online 

repository. Judges and stakeholders in the case may have different 

perspectives on the use of such experts and on what information/advice given by the expert to the judge should be disclosed to parties/

stakeholders. For a discussion of certain issues relating to the use on 

a nontestifying consultant, see Melissa B. Jacoby, Federalism Form 

and Function in the Detroit Bankruptcy, 33 Yale J. on Reg. 55, 92–94 

(2016).

E. Implementation and Postconfirmation Issues

After the entry of the confirmation order, the judge’s jurisdiction 

over the Chapter 9 case continues for purposes of implementation of 

the plan and closing the case. Section 901 also incorporates several 

sections of Chapter 11—§§ 1142(b), 1143, 1144, and 1145—that address postconfirmation matters. The following summarizes a few key 

aspects of the postconfirmation period.

1. Scope of Discharge

Except as provided in § 944(c), a “debtor is discharged from all debts 

as of the time when – (1) the plan is confirmed; (2) the debtor deposits any consideration to be distributed under the plan with a 

disbursing agent appointed by the court; and (3) the court has de-
70

Navigating Chapter 9 of the Bankruptcy Code

termined that – (A) any security so deposited will constitute, after 

distribution, a valid legal obligation of the debtor; and (B) that any 

provision made to pay or secure payment of such obligation is valid.” 

11 U.S.C. § 944(b). Section 944(c) in turn provides that the debtor is 

not discharged from any debt that is carved out from the discharge 

under the plan or confirmation order or that is “owed to an entity 

that, before confirmation of the plan, had neither notice nor actual 

knowledge of the case.” 11 U.S.C. § 944(c).

2. Continuing Jurisdiction of Court and Closing of Case

Under § 945(a), “the court may retain jurisdiction over the case for 

such period of time as is necessary for the successful implementation 

of the plan.” See also Fed. R. Bankr. P. 3020(d). Except as provided in 

§ 945(a), the court “shall close the case when the administration of 

the case has been completed.” 11 U.S.C. § 945(b). The judge’s postconfirmation jurisdiction, however, remains subject to the sovereignty 

of the state and the potential Tenth Amendment issues discussed at 

Part II. At least one judge has confirmed a plan of adjustment that 

provides, “pursuant to Bankruptcy Code section 945(a), the Court 

shall retain jurisdiction over the Case and as provided in Section 6.4 

of the Plan.” In re Jefferson Cty., Ala., No. 11–05736 at 77–78 (Bankr. 

N.D. Ala. Nov. 22, 2013) [ECF No. 2248]. The Jefferson County confirmation order and section 6.4 of the debtor’s plan extended the 

court’s postconfirmation jurisdiction to, among other things, matters involving the implementation of, and distributions under, the 

plan. Similarly, the bankruptcy court in In re City of Central Falls, 

R.I., No. 11–13105 (Bankr. D.R.I.) [ECF No. 572], retained jurisdiction for the life of the plan (six years), conducts an annual status conference postconfirmation, and requires quarterly attestation forms 

be filed demonstrating that the city remains in material conformity 

with the terms of the six-year financial projections.

3. Postconfirmation Modification of the Plan

As discussed at Part VII.A, Chapter 9 addresses a debtor’s ability 

to modify a plan prior to confirmation. 11 U.S.C. §§ 942, 1127(d). 

It does not, however, speak to postconfirmation modifications. Indeed, § 942 does not mention postconfirmation modifications, and 

Chapter 9 does not incorporate § 1127(b) addressing postconfirma-
71

VII. The End of the Case: Plan Confirmation, Postconfirmation, and Dismissal Issues

tion modifications in the Chapter 11 plan context. Consequently, 

the Bankruptcy Code does not expressly recognize authority for a 

Chapter 9 debtor to modify its plan postconfirmation. See, e.g., In 

re East Shoshone Hosp. Dist., No. 98–20934–9, 2000 WL 33712301, 

at *3 (Bankr. D. Idaho Apr. 27, 2000) (concluding that “the absence 

of a correlative [chapter 11] provision in chapter 9 was intentional” 

and “indicates that, in chapter 9, postconfirmation modifications are 

not allowed”). But see, e.g., In re Barnwell Cty. Hosp., 491 B.R. 408 

(Bankr. D.S.C. 2013) (permitting debtor to modify plan after confirmation to substitute purchaser when sale approved in confirmed 

plan failed to close); Ault v. Emblem Corp. (In re Wolf Creek Valley 

Metro. Dist. IV), 138 B.R. 610, 619–20 (D. Colo. 1992) (declining 

to adopt per se rule against postconfirmation amendments in the 

Chapter 9 context).

4. Revocation of Confirmation Order

Section 1144 of the Bankruptcy Code is made applicable to Chapter 

9 cases by § 901. Accordingly, on request of a party in interest and 

filed within 180 days after entry of the confirmation order, the judge, 

after notice and hearing, may revoke the order of confirmation if, 

and only if, the order was procured by fraud. 11 U.S.C. §§ 901(a), 

1144.

5. Application of Equitable Mootness in Appeals

If a party appeals the confirmation order, the status of the debtor’s 

plan of adjustment and the debtor’s emergence from Chapter 9 may 

be thrown into limbo. Parties relying on the terms of the plan may 

not know whether the appellate court will uphold the confirmation 

order or how the appeal affects their rights under the plan. Most 

courts consider these factors under the doctrine of equitable mootness in the Chapter 11 plan context. The application of the doctrine 

of mootness in Chapter 9, however, is unsettled. Not many courts 

have addressed this issue. Of the courts that have, the U.S. Court of 

Appeals for the Sixth and Ninth Circuits have applied the doctrine of 

equitable mootness to a Chapter 9 plan of adjustment, and the U.S. 

District for the Northern District of Alabama has declined to apply 

it. Compare In re City of Detroit, Mich., 838 F.3d 792 (6th Cir. 2016) 

(dismissing appeal of plan of adjustment); In re City of Vallejo, Cal., 
72

Navigating Chapter 9 of the Bankruptcy Code

551 F. App’x 339 (9th Cir. 2013); In re City of Stockton, Cal., 542 B.R. 

261, 273–74 (9th Cir. BAP 2015) with Bennett v. Jefferson Cty., 518 

B.R. 613 (N.D. Ala. 2014) (declining to apply the doctrine of equitable mootness). As of the publication of this manual, an appeal of 

the latter decision was pending before the U.S. Court of Appeals for 

the Eleventh Circuit. See Bennett v. Jefferson Cty., Ala., 518 B.R. 613 

(N.D. Ala. 2014), appeal granted (11th Cir. 14–90024).

F. Dismissal of the Case

Section 930(a) authorizes the dismissal of a Chapter 9 case, after notice and a hearing, for (1) want of prosecution, (2) unreasonable delay by the debtor that is prejudicial to the creditors, (3) failure to propose a plan within the time fixed under § 941, (4) nonacceptance of 

a plan within the time fixed by the judge, (5) material default by the 

debtor under a confirmed plan, or (6) termination of a confirmed 

plan by the occurrence of a condition specified in the plan. These 

factors are not exhaustive and the judge has discretion to dismiss 

for cause based on other grounds. 6 Collier on Bankruptcy ¶ 930.01 

(16th ed. 2017).

Section 930(b) provides for mandatory dismissal of the case “if 

confirmation . . . is refused.” The distinction between permissive and 

mandatory dismissal under this section is not apparent. Commentary ascribes the two provisions to probable “legislative oversight . . . 

[because] [t]he House bill did not contain the mandatory dismissal 

provision . . . [and] [t]he Senate bill did not contain the . . . permissive dismissal provision . . . .” 6 Collier on Bankruptcy ¶ 930.03 

(16th ed. 2017). At least one judge has read the two provisions of 

§ 930 as alternatives in the confirmation context by denying confirmation of the debtor’s fourth amended plan of adjustment with leave 

to amend or modify the plan under § 930(a)(5), thus not invoking 

the mandatory dismissal provision of § 930(b). In re Sanitary & Improvement Dist. No. 7 of Lancaster Cty., Neb., 98 B.R. 970 (Bankr. D. 

Neb. 1989). In addition, at least one judge found cause for dismissal 

under § 930 when the debtor in a special district case requested dismissal, despite opposition from creditors. In re Richmond Unified 

Sch. Dist., 133 B.R. 221 (Bankr. N.D. Cal. 1991).
73

VIII. Issues Common in Smaller and Special Purpose Entity Cases

VIII. Issues Common in Smaller and Special 

Purpose Entity Cases

Chapter 9 cases present unique issues and, in general, no two Chapter 9 cases are exactly alike. Some common themes emerge, however, 

in Chapter 9 cases depending on the size of the case and the kind of 

debtor. For example, a case involving a smaller city, township, or a 

special purpose entity may not warrant the space and resource needs 

of a larger municipal case. That does not suggest that the substantive 

issues will be any easier, but it may ease logistical, staffing, and other 

resource issues for the judge and the clerk of court. This section discusses some key aspects of smaller and special purpose entity cases. 

As used in this section, the term special purpose entity refers to special districts and other entities that might constitute a public agency 

or instrumentality of the state under § 101(40) of the Bankruptcy 

Code, such as transportation districts, water and sewer districts, 

public utilities, public improvement districts, public hospitals, and 

public schools. Appendix B contains a list of Chapter 9 cases filed 

since 2008 and includes smaller and special purpose entity Chapter 

9 cases.

A. Resources and Scaling Case to Size of Debtor

A smaller or special purpose entity case may not require the additional staffing and resources discussed above at Part IV.B. It may be 

sufficient for the clerk of court to identify specific staff members to 

handle inquiries regarding the case and docketing associated with 

the case. The judge and the clerk of court should assess the needs of 

each case and tailor any of the resource and staffing issues discussed 

in this manual accordingly. 

B. Importance of Status Conferences and Timelines

In a smaller or special purpose entity case, the judge may find additional value in case-management and scheduling orders. Each judge 

should determine his or her own approach, but these cases may benefit from the judge providing more rather than less procedural guidance. Because of the limited judicial oversight in a Chapter 9 case 

and the potential for fewer active stakeholders in a smaller or special purpose entity case, such a case may linger or stall more readily 
74

Navigating Chapter 9 of the Bankruptcy Code

than larger cases. Although the judge does not have any additional 

oversight capacity in smaller or special purpose cases and should be 

mindful of state sovereignty issues, detailed deadlines relating to the 

plan of adjustment in accordance with § 941 of the Bankruptcy Code 

and periodic “check-ins” with the judge through scheduled status 

conferences may help the debtor continue its progress in the case or 

identify barriers to its successful exit from bankruptcy. A collection 

of case-management orders is in the online repository.

C. Issues Specific to State-Owned or State-Controlled 

Entities or Districts 

In addition to the potential difference in size or scope of the case, a 

special purpose entity case may present different issues concerning 

eligibility, authorization to file, and financing arrangements. The following summarizes a few of these key issues.

1. Eligibility Issues

As discussed at Part V.C, whether an entity constitutes a public 

agency or instrumentality of the state is a fact-dependent and often 

disputed matter. Issues frequently arise with entities that constitute 

public–private partnerships or that introduce special tax entities or 

unique financing structures. For examples of how courts approach 

these issues, see, e.g., In re Las Vegas Monorail Co., 429 B.R. 770 

(Bankr. D. Nev. 2010) (although bonds qualified as tax exempt because debtor was identified as an “instrumentality of the state” in the 

bond documents, the debtor did not possess other characteristics 

of being a municipality for purposes of Chapter 9 eligibility); In re 

New York City Off-Track Betting Corp., 427 B.R. 256 (Bankr. S.D.N.Y. 

Mar. 22, 2010) (debtor, which was a public benefit corporation created by the state, was a municipality for purposes of Chapter 9); In 

re County of Orange, Cal.: Orange County Investment Pools, 183 B.R. 

605 (Bankr. C.D. Cal. 1995) (Orange County Investment Pools was 

an instrumentality of the county and not state; thus it was not eligible to be a debtor under Chapter 9); In re Suffolk Regional Off-Track 

Betting Corp., 462 B.R. 397 (Bankr. E.D.N.Y. 2011) (local law authorizing municipalities to file Chapter 9 cases did not include public 

benefit corporations).
75

VIII. Issues Common in Smaller and Special Purpose Entity Cases

2. Authorization

As with any municipal debtor, special purpose entities must be 

authorized to file Chapter 9 by applicable state law and by the officials charged with running the entity (typically elected officials). 

Some special purpose entities, however, may be organized more like 

a business entity and lack the kind of public official that oversees 

the business of cities, townships, and counties. Section 921(a) of the 

Bankruptcy Code addresses this potential by providing, “Notwithstanding sections 109(d) and 301 of this title, a case under this Chapter concerning an unincorporated tax or special assessment district 

that does not have such district’s own officials is commenced by the 

filing under § 301 of this title of a petition under this chapter by such 

district’s governing authority or the board or body having authority 

to levy taxes or assessments to meet the obligations of such district.” 

11 U.S.C. § 921(a).

3. Financing Issues

A general overview of municipal finance is provided at Part III.F. Notably, states may issue revenue bonds on behalf of quasi-governmental entities such as special purpose entities or districts (e.g., transportation or hospital districts), or authorize such entities or districts 

to issue bonds directly. These bonds often qualify for tax-exempt 

treatment under federal law, but the state is not directly or indirectly liable on the debt. Rather, the special purpose entity or district 

typically is liable on the debt, or the debt is secured by the assets of 

the entity or district, which may limit the assets available to satisfy 

other creditors. In general, these bonds may be either general obligation bonds (subject to payment from tax revenue in the district) or 

revenue bonds (supported by revenue from the particular project or 

identified source within the district). Such bonds also raise the issues 

common to all general obligation and revenue bonds discussed at 

Parts III.F, V.F, VI.A, VI.C, VI.D, and VII.D.

D. Issues Specific to Hospital Bankruptcies

Public hospitals generally qualify as municipalities that may file 

Chapter 9 cases, provided they satisfy the eligibility requirements of 

§ 109(c) of the Bankruptcy Code. For a discussion of § 109(c), see 

Part V.C. A public hospital debtor may introduce additional public 
76

Navigating Chapter 9 of the Bankruptcy Code

policy issues into a Chapter 9 case relating to the ongoing care of existing patients and the continued availability of care to affected communities. In addition, these cases also may raise the following issues. 

1. Treatment of Patient Information

A Chapter 9 debtor may seek relief to protect from disclosure certain 

patient information. This kind of relief may be warranted under both 

federal and state law protecting patient information from public disclosure. Debtors have requested and obtained orders protecting certain patient information from disclosure in several Chapter 9 cases. 

See also 11 U.S.C. § 351 (addressing the disposal of patient records); 

Fed. R. Bankr. P. 2015 (governing requests to transfer patients); Part 

IV.D (discussing privacy and docketing issues with patient information). This kind of relief may be requested at the time of the petition 

or shortly thereafter.

2. Appointment of a Patient Care Ombudsman

Section 333(a)(1) of the Bankruptcy Code provides that, “If the 

debtor in a case under chapter 7, 9, or 11 is a health care business, 

the court shall order, not later than 30 days after the commencement 

of the case, the appointment of an ombudsman to monitor the quality of patient care and to represent the interests of the patients of the 

health care business unless the court finds that the appointment of 

such ombudsman is not necessary for the protection of patients under the specific facts of the case.” 11 U.S.C. § 333(a)(1). Bankruptcy 

Rule 2007.2 governs requests for, and the appointment of, a patient 

care ombudsman. Bankruptcy Rule 2015.1 addresses periodic reports from, and requests to review confidential patient information 

by, a health care ombudsman. Section 333 was added to the Bankruptcy Code by the 2005 amendments to ensure that patients who 

are not creditors in the case still have some voice in the process. A 

patient care ombudsman is not mandatory in every case, however, 

as § 333 permits the judge to decline such an appointment for cause. 

Judges in health care business cases, including those under Chapter 

9, have considered a variety of factors in determining whether cause 

exists to grant a debtor’s motion not to appoint an ombudsman. For 

example, in In re Bamberg County Memorial Hospital, No. 11–03877 

[ECF No. 60] (Bankr. D.S.C. June 20, 2011), the judge analyzed, 
77

IX. Issues Common in Larger Cases

among other things, the reasons for the hospital’s Chapter 9 filing, 

the existing oversight of patient care, and the hospital’s history with 

patient care and regulatory compliance. On balance, the judge determined that the appointment of an ombudsman would be redundant 

and would not serve the interests of creditors. Id. See also In re Barnwell Cty. Hosp., 2011 WL 5443025 (Bankr. D.S.C. Nov. 8, 2011); In re 

Valley Health Sys., 381 B.R. 756 (Bankr. C.D. Cal. 2008). This kind 

of relief may be requested at the time of the petition or shortly thereafter. One issue for the court to consider in the Chapter 9 context is 

who will pay the fees and expenses of a patient care ombudsman, as 

the court can only direct payment by the debtor if the debtor consents. See 11 U.S.C. § 904.

3. Sales of Hospitals in Chapter 9

In the context of a proposed sale of a health care business, the judge 

should consider applicable nonbankruptcy law and whether the 

debtor has obtained any regulatory or electoral approvals required 

by such law. See Part VI.C. These considerations are important because, in a Chapter 9 case, the debtor will likely pursue a sale of the 

hospital under its plan of adjustment, as § 363 does not apply in 

Chapter 9 cases. See Parts III.A & VI.C. For example, the judge approved the proposed sale of the hospital under a Chapter 9 plan in 

In re Bamberg County Memorial Hospital, 2012 WL 1890259 (Bankr. 

D.S.C. May 23, 2012). In connection with confirmation, the judge 

evaluated whether the debtor had obtained all necessary regulatory 

and electoral approvals required for the proposed sale in accordance 

with §§ 943(b)(6) and 1129(a)(6). Id. Based on the evidence and 

the waiver of the certificate-of-need requirement under state law, 

the judge determined that the debtor had satisfied all requirements 

and confirmed the plan. Id. See also In re Barnwell County Hosp., 

471 B.R. 849 (Bankr. D.S.C. 2012) (confirming plan of adjustment 

that contemplated a sale of the hospital to same purchaser as that 

involved in Bamberg County Memorial Hospital).

IX. Issues Common in Larger Cases

Larger municipal cases often involve cities or counties with large citizen populations and increased service obligations, which may magnify the policy implications of the issues raised in the case. The cases 
78

Navigating Chapter 9 of the Bankruptcy Code

of Detroit, Stockton, Vallejo, San Bernardino, and Jefferson County 

provide examples of the issues in larger Chapter 9 cases. In addition 

to the issues discussed throughout this manual, these cases also may 

present the following considerations for the judge and the clerk of 

court. Appendix B contains a list of Chapter 9 cases filed since 2008, 

including larger Chapter 9 cases.

A. Logistical Issues 

The kinds of space and staffing issues discussed at Part IV.B are of 

particular importance in larger Chapter 9 cases. These cases generally involve cities or counties with large populations that rely on the 

city or county for basic yet critical services. In such cases the judge 

and the clerk of court may want to consider utilizing some or all of 

the following tools.

• Website. In a larger Chapter 9 case, providing access to online 

information may be an important means for communicating 

information to the community and other parties who might 

be affected directly or indirectly by the case. See Parts IV.B 

and IV.D for additional information on the use of websites and 

on other online issues in Chapter 9 cases. 

• Access to Information. Some or even many parties that are interested in larger Chapter 9 cases may not have ready access 

to PACER or even the Internet to read information about the 

case or to review pleadings or other filings in the case. The 

clerk of court may want to consider other modes of communicating key information about the case to stakeholders and interested parties. These efforts could include publishing information in the local newspaper, posting in the clerk’s office or 

other space in the courthouse generally available to the public, 

or disseminating information through organizations (such as 

labor unions or citizens groups), or webpages hosted by the 

city, townships, or county. 

• Space. Similar to providing access to paper filings, the judge 

and the clerk of court may want to consider whether the court 

has sufficient space to accommodate all parties that may want 

to attend a hearing in the Chapter 9 case. As discussed above, 

the judge and the clerk of court may want to consider alter-
79

IX. Issues Common in Larger Cases

native courtroom space or establishing overflow rooms that 

would provide a live stream of the proceedings taking place in 

the main courtroom. 

• Appearance by Teleconference or Videoconference. The judge 

and the clerk of court may receive an increased number of requests to participate remotely in court proceedings in larger 

Chapter 9 cases. The judge and the clerk of court may want 

to consider establishing protocols for these matters at the beginning of the case. In all matters concerning access to court 

proceedings, the judge and the clerk of court should take care 

to consult the policies of the Judicial Conference. See also Remote Participation in Bankruptcy Court Proceedings (Federal 

Judicial Center 2017) (a copy is available in the online repository).

• Media. Media coverage of Chapter 9 cases has been extensive. 

For example, virtually every hearing in the Stockton case was 

the subject of an article in the Stockton Record. And national 

publications such as The Bond Buyer have closely followed and 

reported on the Detroit, Jefferson County, and Stockton cases. 

Media issues tend to be more prevalent in larger Chapter 9 

cases. The judge and the clerk of court should consider how 

to handle media requests for information, as well as requests 

to attend or record court proceedings. The judge and the clerk 

of court may want to consider establishing protocols for these 

matters at the beginning of the case. In all matters concerning 

access to court proceedings, the judge and the clerk of court 

should take care to consult the policies of the Judicial Conference. 

• Security. Depending on the kind and size of the Chapter 9 entity, additional security measures may be needed to manage 

the case. 

• Claims and Noticing Agents. Depending on the total number 

of assets and liabilities of the Chapter 9 debtor and the number of creditors, the clerk of court may consider employing an 

agent to provide claims-processing services, noticing services, 

or both services pursuant to 28 U.S.C. § 156(c). 
80

Navigating Chapter 9 of the Bankruptcy Code

B. Coordination Issues

Depending on the circumstances of the case, the judge and the clerk 

of court may want to consider proactively coordinating matters in 

the Chapter 9 case with the district court. The district court may 

be able to assist the judge and the clerk of court with, among other things, space and staffing issues, as well as potentially addressing 

media inquiries. See Part IV.B. 

C. Intercreditor Issues

Similar to larger Chapter 11 cases, larger Chapter 9 cases may involve significant intercreditor disputes that potentially impact the 

timing or outcome of the Chapter 9 case. A judge should consider whether such issues exist or whether they have the potential to 

exist in any given Chapter 9 case. The judge may be able to make 

such a determination through the kinds of disclosures discussed at 

Part V.F. Intercreditor issues raise several important questions in the 

context of a Chapter 9 case. For example, does the intercreditor dispute involve issues that should be resolved as part of the Chapter 

9 case or, rather, are they more appropriately addressed in separate 

proceedings unrelated to the Chapter 9 case? Regardless, are the intercreditor disputes likely to influence creditors’ positions regarding 

the debtor’s proposed plan of adjustment? Notably, in the municipal 

bond context, these issues may involve a bond insurer and considering which party holds the claim on the bonds or is entitled to vote 

on the plan. See Parts III.F and V.F (discussing bond insurance). In 

all contexts, the court may want to consider whether mediation may 

help to mitigate or resolve any intercreditor disputes. As discussed 

at Part V.H, intercreditor disputes can impact the timetable of the 

Chapter 9 case and potentially delay confirmation of a plan of adjustment, particularly if the disputes are being litigated in a forum other 

than the bankruptcy court.

X. Key Takeaways

Although Chapter 9 cases follow the general structure of Chapter 11 

cases, judges and clerks of court need to be sensitive to the key differences between a Chapter 9 case and a Chapter 11 case and need to 

plan accordingly. As discussed in this manual, the following points 
81

X. Key Takeaways

may help judges and clerks of court prepare for, and administer, any 

Chapter 9 case filed in their district:

• Mechanics of the Case. Before the case is filed and in its early 

stages, the clerk of court needs to understand the process for 

the bankruptcy judge’s appointment, identify potential docketing and access-to-information issues, and consider how to 

manage potential logistical issues. Likewise, the judge initially 

needs to understand the effect of a Chapter 9 petition for relief 

(i.e., not an order for relief) and the issues surrounding a debtor’s eligibility for an order for relief.

• The Roles of the Parties. In a Chapter 9 case, the role of the 

debtor and the judge, in particular, differ from the roles of 

those parties in a Chapter 11 case. The judge needs to understand the parameters of §§ 903 and 904 of the Bankruptcy 

Code and the underlying constitutional issues, particularly 

those related to the reservation of powers to the states under 

the Tenth Amendment.

• Applicable Law. One of the most significant differences between a Chapter 9 case and a Chapter 11 case is the law governing the case. First, not every section of Chapters 3 and 5 of 

the Bankruptcy Code apply in Chapter 9 cases. Second, not 

every section of Chapter 11 is incorporated into Chapter 9, 

and the confirmation standards differ in certain respects. Finally, state and local law play a significant role in Chapter 9 

cases; the judge needs to determine when deference to state 

or local law is required and when the Bankruptcy Code may 

preempt such law.

• The Dynamics of the Case. Perhaps even more so than in Chapter 11 cases, a judge should be sensitive to the dynamics among 

the debtor, the state, and the various stakeholders in the case. 

Although not a substantive point, this sensitivity may allow a 

judge to better assess timelines for, and potential barriers to, 

the resolution of disputed matters—either in or outside of the 

Chapter 9 case.

• Case Management.  Effective case management is critical to 

the timely disposition of Chapter 9 cases; absent such man-
82

Navigating Chapter 9 of the Bankruptcy Code

agement, these cases may last longer than necessary and not 

provide the municipality the relief it needs.

• Mediation. Mediation may be an effective case-management 

tool. Some cases have used it extensively and some have not.  

Early in the case the trial judge needs to decide whether the 

municipality may benefit from court-annexed mediation and 

how the mediation should be structured.  In large cases, disputes and creditors  are likely to be divided such that settlements can be reached.

• The End Game. Given the more limited role of the judge in a 

Chapter 9 case, the judge should try to assess the debtor’s proposed exit strategy early in the case. This may help the judge 

determine the parameters of any case-management order, as 

well as the central issues in matters brought before the judge 

by the debtor or other stakeholders prior to the confirmation 

process. In addition, the judge should consider potential postconfirmation issues, such as any retention of jurisdiction to 

consider issues arising under the confirmed plan.
83

Note: This chart was prepared based on materials provided by Marc A. Levinson, Esq., Orrick, 

Herrington & Sutcliffe LLP, Sacramento, California.

• Municipalities cannot be put into 

Chapter 9 involuntarily.

- Only a municipality can initiate a 

Chapter 9 case. Section 303 of the 

Bankruptcy Code, which provides 

for the commencement of involuntary cases, is not applicable in 

Chapter 9.

- A Chapter 9 case cannot be 

converted to one under another 

chapter.

• Chapter 9 debtors are not required 

to file schedules or statement of 

financial affairs.

- Pursuant to § 924, a Chapter 9 

debtor is required to file a list of 

creditors.

- Under § 925, any claim listed on 

the list of creditors is a proof of 

claim deemed filed under § 501, 

unless listed as contingent, disputed or unliquidated.

- No reporting requirements.

• Publication of the notice of commencement of the case.

- Section 923 requires publication 

of a Notice of Commencement for 

three consecutive weeks in a local 

newspaper and in a newspaper 

having general circulation among 

bond dealers and bondholders.

• Involuntary cases permitted.

- A Chapter 11 case can be converted to one under Chapter 7.

• Debtor required to file schedules and 

statement of affairs.

- Under § 1111(a), no proof of claim 

required unless debt is listed in 

schedules as contingent, disputed, 

or unliquidated.

- Debtor must submit quarterly 

statements of disbursements and 

make other disclosures (Rule 2015).

• No publication of notice of commencement of the case required.

Chapter 9 Chapter 11

Appendix A: Comparison of Chapter 9 and Chapter 11 of 

the U.S. Bankruptcy Code

 Commencement of the Case
84

Navigating Chapter 9 of the Bankruptcy Code

- The notice must provide a date 

by which objections to eligibility 

must be filed.

• Bankruptcy judge is designated by 

the chief judge of the circuit rather 

than by the clerk of the bankruptcy 

court. § 921(b).

 Eligibility

• Must be a municipality (political 

subdivision, public agency, or instrumentality of a state). § 109(c)(1).

• Legislative Authority

- The specific municipality, or 

municipalities generally, must be 

authorized under state law to be a 

Chapter 9 debtor. § 109(c)(2).

- Certain state statutes contain 

limitations as to the type of entity 

that may file (i.e., such as a water 

district), and some require further 

approval from the state or a state 

official prior to any filing.

• Insolvency

- Debtor bears the burden of 

proving that it is insolvent as of 

the petition date. § 109(c)(3). A 

municipality is insolvent if it is 

(1) generally not paying its debts 

as they become due unless such 

debts are the subject of a bona 

fide dispute, or (2) unable to pay 

its debts as they become due. 

§ 101(32)(C).

• Must desire to effect a plan to adjust 

its debts. § 109(c)(4).

• Must satisfy one of the requirements 

of § 109(c)(5).

• Sole eligibility requirement relates 

to nature of the debtor (such as 

railroads and persons eligible to be 

Chapter 7 debtors). § 109(d).

• No insolvency requirement.

Chapter 9 Chapter 11

• Judge assigned at random by the 

clerk of the bankruptcy court.
85

Appendix A: Comparison of Chapter 9 and Chapter 11 of the U.S. Bankruptcy Code

• A bankruptcy judge may dismiss a 

Chapter 9 petition if the debtor did 

not file the petition in good faith. 

§ 921(c). 

• In the event of an appeal from the 

entry of an order for relief, the 

bankruptcy court may not delay 

any proceeding in the Chapter 9 

case, nor may any court issue a stay. 

§ 921(e).

 Limitations on Powers of Court

• Because of limitations imposed by 

the Tenth Amendment to the U.S. 

Constitution on Congress’s power 

over the states, the Bankruptcy Code 

provisions with respect to municipality debtors place restraints on the 

powers of a federal bankruptcy court 

to interfere with the operations of a 

municipality.

• State maintains its powers to control 

municipalities, subject to specific 

Bankruptcy Code provisions (such 

as the power to reject contracts). 

§ 903.

• Absent consent by the debtor, the 

court may not interfere with (1) 

any of the political or governmental 

powers of the debtor, (2) any of the 

property or revenues of the debtor, 

(3) the debtor’s use or enjoyment 

of any income-producing property. 

§ 904.

- A Chapter 9 debtor does not need 

court approval to use, sell, or lease 

property, including cash collateral 

(§ 363 is not incorporated into 

Chapter 9).

• Chapter 11 debtors subject to § 363.

Chapter 9 Chapter 11

• No statutory good-faith filing requirement.

• No Chapter 11 equivalent.
86

Navigating Chapter 9 of the Bankruptcy Code

- The debtor maintains complete 

control of most of its financial affairs and operations (in bankruptcy, a municipality will still need 

freedom to operate and provide 

services to citizens).

• Court cannot appoint an examiner or a trustee (except relating to 

the recovery of avoidable transfers 

[§ 926(a)]).

• The U.S. trustee (or bankruptcy 

administrator) has no general 

supervisory authority in a Chapter 9 

case (reason being that it would be 

an improper interference with the 

political and financial affairs of the 

municipality debtor).

- Does not examine the debtor at a 

meeting of creditors—there is no 

meeting of creditors.

- Does not have the authority to 

move for appointment of a trustee 

or examiner or for conversion of 

the case.

- Does not monitor the financial 

operations of the debtor or review 

the fees of professionals retained 

in the case.

• The U.S. trustee’s most important 

role in Chapter 9 cases is to appoint 

a creditors committee or other committee(s) in the event court orders 

appointment of a committee.

• The U.S. trustee (or bankruptcy 

administrator) plays an active role in 

overseeing the bankruptcy case.

- Conducts first meeting of creditors.

- Appoints members of official 

committees.

- May move for appointment of a 

trustee or examiner.

- May move to convert the case.

- Monitors financial operations and 

fee requests from estate professionals.

Chapter 9 Chapter 11

 Limited Role of U.S. Trustee (or Bankruptcy Administrator)

• Trustee or examiner may be appointed.
87

Appendix A: Comparison of Chapter 9 and Chapter 11 of the U.S. Bankruptcy Code

Chapter 9 Chapter 11

• Sections 327 through 331 apply.

• Automatic stay applies only to the 

debtor and its property.

 Case Administration

• Chapter 9 does not create an estate.

- Section 541 is not incorporated 

into Chapter 9.

- Section 902(1) defines “property 

of the estate” to mean “property of 

the debtor.”

• Retention of Professionals

- Sections 327 through 331 of the 

Bankruptcy Code are not applicable in a Chapter 9 case. 

- The only provision of Chapter 

9 governing the compensation 

of professionals provides as a 

confirmation requirement that all 

amounts to be paid by the debtor 

or by any person for services or 

expenses in the case or incident to 

the plan have been fully disclosed 

and are reasonable. § 943(b)(3).

• Automatic Stay

- Automatic stay provisions apply.

- Section 922(a) adds automatic stay 

provisions that prohibit actions 

against officers and inhabitants of 

the debtor if the action seeks to 

enforce a claim against the debtor.

- Section 922(d) limits the applicability of the stay.

— Chapter 9 petition does not 

operate to stay application 

of pledged special revenues 

to payment of indebtedness 

secured by such revenues.

— An indenture trustee or other 

paying agent may apply pledged 

funds to payments coming due 

or distribute the pledged funds 

to bondholders without violating the automatic stay.

• Commencement of the case creates 

an estate.
88

Navigating Chapter 9 of the Bankruptcy Code

 Avoidable Transfers

• Bankruptcy Code avoidance powers 

are applicable, with one exception.

– In Chapter 9 cases, a transfer of 

property by a municipality to or 

for the benefit of a bondholder on 

account of such bond may not be 

avoided as a preference. § 926(b).

Chapter 9 Chapter 11

• Committees

- Creditors committee has powers 

and duties similar to those of a 

committee in a Chapter 11 case.

- Cannot be appointed until after 

the entry of the order for relief, 

which may take months in a 

Chapter 9 case in which eligibility 

is challenged.

• Right to be heard more expansive in 

Chapter 9.

- Section 1109 applies.

- Rule 2018(c) provides that:

— The Secretary of the Treasury 

of the United States may, or if 

requested by the court shall, 

intervene in a Chapter 9 case.

— Representatives of the state in 

which the debtor is located may 

intervene in a Chapter 9 case 

with respect to matters specified 

by the court.

• Dismissal

- Court may dismiss a Chapter 9 petition if it concludes the debtor did 

not file the petition in good faith 

or if the petition does not meet the 

requirements of Chapter 9.

- Court also may dismiss the petition for cause. § 930.

• Court may convert to Chapter 7 or 

dismiss as specified in § 1112.

• Bankruptcy Code avoidance powers 

are applicable.
89

Appendix A: Comparison of Chapter 9 and Chapter 11 of the U.S. Bankruptcy Code

• A Chapter 11 debtor cannot unilaterally abrogate a collective bargaining 

agreement.

- Section 1113 requires a Chapter 

11 debtor to negotiate proposed 

modifications of a collective 

bargaining agreement with the 

authorized representative of the 

employees covered by such agreement. 

• Section 1114 enumerates the stringent ground rules for treatment of 

retiree benefits.

• A creditor with a nonrecourse claim 

may, under certain circumstances, 

be treated as having recourse against 

the debtor. § 1111(b).

• Creditors may file a plan after termination of exclusivity.

• A trustee may file a plan because 

such appointment terminates exclusivity.

Chapter 9 Chapter 11

• Section 365 applies in Chapter 9 

cases.

• Collective bargaining agreements.

- Section 1113 does not apply in 

Chapter 9 cases.

- Most courts analyze under § 365.

• Section 1114 does not apply in 

Chapter 9 cases.

 Special Revenues 

• Obligations secured by a lien on 

special revenues retain such lien 

postpetition in Chapter 9. However, 

the security interest is subject to the 

necessary operating expenses of the 

project involved. § 928(b).

• The holder of a claim payable solely 

from special revenues does not have 

recourse against the debtor. § 927. 

This prevents the conversion of revenue bonds into general obligation 

bonds.

 Plan of Adjustment

• Only the debtor may file a plan for 

adjustment of debts—creditors may 

not propose and file competing 

plans.

 Executory Contracts and Unexpired Leases
90

Navigating Chapter 9 of the Bankruptcy Code

• The Bankruptcy Code does not fix a 

specific deadline by which the debtor 

must file a plan. If a plan is not filed 

with the petition, the debtor shall file 

such plan at such later time as the 

court fixes. § 941.

• Plan content and confirmation 

requirements in Chapter 9 cases are 

similar to those applicable in Chapter 11 cases.

 Discharge

• A municipality debtor receives a 

discharge of all debts as of the time 

when: (1) the plan is confirmed; 

(2) the debtor deposits any consideration to be distributed under 

the plan with the disbursing agent 

appointed by the court; and (3) the 

court determines that securities 

deposited with the disbursing agent 

will constitute valid legal obligations 

of the debtor and that any provision 

made to pay or secure payment of 

such obligations is valid. § 944(b).

• A municipality debtor is not discharged from any debt (1) excepted from discharge by the plan or 

the order confirming the plan, or 

(2) owed to an entity that, before 

confirmation of the plan, had neither 

notice nor actual knowledge of the 

case. § 944(c). 

• Confirmation of a plan discharges 

a debtor from most debts that arose 

before the date of confirmation. 

§ 1141(d). After confirmation, the 

debtor is required to make plan 

payments and is bound by the provisions of the plan.

Chapter 9 Chapter 11
91

Appendix B: Chapter 9 Cases Filed During Fiscal Years 

2008–2016

Case

District Number Name of Debtor

Fiscal Year 2016

E.D. Cal. 16-10015 Southern Inyo Healthcare District

W.D. Ky. 13-10940 Adair County Public Hospital District Corporation 

 (reopen)

W.D. Mo. 16-42357 Lake Lotawana Community Improvement District

D. Neb. 16-80010 Sanitary and Improvement District No. 10, 

Washington County, Nebraska

E.D. Okla. 16-81001 Pushmataha County – City of Antlers Hospital 

 Authority

Fiscal Year 2015

E.D. Cal. 15-23888 Community Facilities District No. 1990-1 

(Wildwood Estates), Nevada County, California

W.D. Ky. 15-32679 City of Hillview, Kentucky

D. Neb. 10-82794 Sanitary and Improvement District #507 of Douglas

County, Nebraska (reopen)

D. Neb. 12-81926 Sanitary and Improvement District No. 270 of Sarpy 

County, Nebraska (reopen)

E.D. Okla. 12-80061 Rural Water District No. 1, Cherokee County, 

Oklahoma (reopen)

N.D. Okla. 15-10277 Craig County Hospital Authority

D.R.I. 14-12785 Central Coventry Fire District

Fiscal Year 2014

W.D. Ark. 14-70015 Ozark Mountain Solid Waste District

W.D. Ark. 14-71606 Washington County Municipal Properties Owners 

Improvement District No. 14

N.D. Cal. 14-10510 Palm Drive Health Care District

D. Colo. 14-14207 Ravenna Metropolitan District

M.D. Fla. 13-13032* Whalen, Bruce Thomas

S.D. Miss. 14-01048 Natchez Regional Medical Center

E.D. Mo. 14-46094 Lakeside 370 Levee District a political subdivision of 

the State of Missouri
92

Navigating Chapter 9 of the Bankruptcy Code

D. Neb. 14-80658 Sanitary and Improvement District #501, Douglas 

County, Nebraska

D. Neb. 14-81592 Sanitary and Improvement District #521, Douglas 

County, Nebraska

D.S.C. 14-03299 Union Hospital District

Fiscal Year 2013

E.D. Ark. 13-13751 Pulaski County Property Owners’ Improvement 

District No. 4 (Villages of San Luis Project)

W.D. Ark. 12-73750 Siloam Springs Municipal Property Owners’ 

Improvement District No. 1 - Gabriel Park

N.D. Cal. 12-12753 Mendocino Coast Health Care District

M.D. Fla. 12-07123* Hall, Darrell L.

M.D. Fla. 13-03044* Le, Long Thanh

W.D. Ky. 13-10939 Adair County Hospital District

W.D. Ky. 13-10940 Adair County Public Hospital District Corporation

E.D. Mich. 13-53846 City of Detroit, Michigan

D. Neb. 13-81167 Sanitary & Improvement District No 494, Douglas 

County, Nebraska

D. Neb. 13-81668 Sanitary and Improvement District No. 249 of Sarpy 

County, Nebraska

W.D. Okla. 13-10791 Pauls Valley Hospital Authority d/b/a Pauls Valley General 

 Hospital

N.D. Tex. 13-70103 Hardeman County Hospital District d/b/a Hardeman 

County Memorial Hospital

Fiscal Year 2012

N.D. Ala. 11-05736 Jefferson County, Alabama

E.D. Ark. 12-12309 Sylamore Valley Water Association Public Facilities Board 

of Izard County, Arkansas

W.D. Ark. 11-74614 Centerton Municipal Property Owners’ Improvement 

District No. 3 - Versailles

C.D. Cal. 12-28006 City of San Bernardino, California

E.D. Cal. 12-15132* Barry Halajian SS Municiple Corporation

E.D. Cal. 12-32118 City of Stockton, California

Case

District Number Name of Debtor

Fiscal Year 2014 (cont’d)
93

Appendix B: List of Chapter 9 Cases Filed During Fiscal Years 2008–2016

E.D. Cal. 12-32463 Town of Mammoth Lakes, California

N.D. Cal. 11-14625 Mendocino Coast Recreation and Park District

M.D. Fla. 12-11403* Mendoza Guerrero, Ana Milena

S.D. Ga. 12-50305 Hospital Authority of Charlton County (reopen)

S.D. Ga. 12-50305 Hospital Authority of Charlton County

D. Neb. 11-82739 Sanitary and Improvement District #512 of Douglas 

County, Nebraska

D. Neb. 12-80115 Sanitary and Improvement District No. 268 of Sarpy 

County, Nebraska

D. Neb. 12-81249 Sanitary and Improvement District #523, Douglas County, 

 Nebraska

D. Neb. 12-81926 Sanitary and Improvement District No. 270 of Sarpy 

County, Nebraska

E.D. N.Y. 12-43503 Suffolk Regional Off-Track Betting Corporation

E.D. Okla. 12-80061 Rural Water District No. 1, Cherokee County, Oklahoma

M.D. Pa. 11-06938 City of Harrisburg, Pa.

D.S.C. 11-06207 Barnwell County Hospital

Fiscal Year 2011

D. Idaho 11-00481 Boise County

D. Neb. 10-83596 Sanitary and Improvement District No. 528 of Douglas 

County, Nebraska

D. Neb. 11-80953 Sanitary and Improvement District No. 517 of Douglas 

County, Nebraska

D. Neb. 11-82460 Sanitary and Improvement District No. 258 of Sarpy 

County, Nebraska

D. Neb. 11-82482 Sanitary and Improvement District No. 513 of Douglas 

County, Nebraska

E.D.N.Y. 11-42250 Suffolk Regional Off-Track Betting Corporation

D.R.I. 11-13105 The City of Central Falls, Rhode Island

D.S.C. 11-03877 Bamberg County Memorial Hospital

Fiscal Year 2010

S.D. Ala. 09-15000 City of Prichard, Alabama

E.D. Cal. 09-19728 Sierra Kings Health Care District

Case

District Number Name of Debtor

Fiscal Year 2012 (cont’d)
94

Navigating Chapter 9 of the Bankruptcy Code

D. Idaho 10-40344 Lost Rivers District Hospital

W.D. Mo. 10-44629 Lake Lotawana Community Improvement District,

D. Neb. 09-83145 Sanitary and Improvement District 509 of Douglas 

County, Nebraska

D. Neb. 10-82794 Sanitary and Improvement District #507 of Douglas 

County Nebraska

S.D.N.Y. 09-17121 New York City Off-Track Betting Corporation

E.D. Okla. 09-81814 Town of Moffett

E.D. Pa. 09-23077* Coral, Leticia

D.S.C. 10-04467 Connector 2000 Association, Inc.

S.D. Tex. 10-31933 Grimes County MUD #1

Fiscal Year 2009

S.D. Ill. 09-31744 Village of Washington Park

S.D. Miss. 09-00477 Natchez Regional Medical Center

D. Neb. 09-80404 Sanitary and Improvement District 452 of Douglas 

County, Nebraska

D. Neb. 09-81825 Sanitary and Improvement District No. 251 of 

Sarpy County, Nebraska

M.D. Pa. 09-02736 Westfall Township

W.D. Wash. 08-45227 Pierce County Housing Authority

Fiscal Year 2008

E.D. Ark. 08-12413 City of Gould, Arkansas

W.D. Ark. 08-72841 Benton County Property Owners’ Improvement 

District No. 6 - Sunset Bay Division

E.D. Cal. 08-26813 City of Vallejo, California

* Case appeared to be or was filed improperly under Chapter 9.

Note: Three CM/ECF test cases filed in the District of Minnesota (docket numbers 

05-11111, 05-22222, 05-55555) were deleted from the sample. Data include five reopened cases.

 

Case

District Number Name of Debtor

Fiscal Year 2010 (cont’d)
The Federal Judicial Center

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The Chief Justice of the United States, Chair 

Magistrate Judge Tim A. Baker, U.S. District Court for the Southern District of Indiana 

Judge Curtis L. Collier, U.S. District Court for the Eastern District of Tennessee 

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