Chapter 9 of the U.S. Bankruptcy Code provides a legal mechanism through which municipalities may be protected from their creditors as they attempt to develop and negotiate a plan to adjust their debts. Although chapter 9 was enacted as part of the Bankruptcy Code pursuant to Congress's power under Article I, § 8, clause 4, municipal bankruptcies are different from the bankruptcies of individuals and businesses. There is no provision for liquidation of a municipality's assets to satisfy creditors, there is no "bankruptcy estate," and the bankruptcy court has limited authority over the conduct of the municipality during the pendency of the case. Furthermore, creditors do not have the ability to file a petition for the municipality—an "involuntary case." Many of these limitations are in the code to preserve the states' autonomy under the Tenth Amendment to the U.S. Constitution. The recent recession has caused fiscal distress for states and municipalities as well as for individuals and businesses. In 2009, there were more filings by municipalities under chapter 9 of the Bankruptcy Code than in 2007 and 2008 combined. Despite this seemingly dramatic increase in chapter 9 filings, chapter 9 is, and has been, a relatively seldom used provision of the Bankruptcy Code, generally averaging fewer than 10 filings per year. Many of those filings have been by small government agencies such as municipal utilities, school districts, or single-purpose entities (e.g., a hospital or convention center). Reports of significantly decreased revenues and increased expenses in both cities and states as well as predictions of a significant number of municipal bond defaults in the coming years have sparked interest in municipal bankruptcy, as well as calls for allowing states to use the Bankruptcy Code as a means of adjusting their own debts. Under the current Bankruptcy Code, there is no provision that would allow states to file for bankruptcy protection; however, less than 100 years ago, municipalities were not eligible to file for bankruptcy protection. A brief legislative history is provided in the Appendix . Only municipalities may file under chapter 9 of the Bankruptcy Code, and it is the only chapter under which a municipality may file even if that municipality is incorporated. Not all municipalities can file. A municipality must be specifically authorized by its state to file under chapter 9. The municipality must be insolvent and must be willing to negotiate a plan to adjust its debts. It generally must also show that it has negotiated in good faith with its creditors. Challenges to an entity's eligibility to file under chapter 9 are a prime area for litigation by creditors following a chapter 9 filing. The municipality carries the burden of proving that it is eligible to file under chapter 9. If it is not, then the case will be dismissed. Litigation of challenges to chapter 9 eligibility can be a time-consuming process. Most people, hearing the term "municipality," probably think of cities and towns. However, under the Bankruptcy Code, the term encompasses a broader variety of entities. Section 101(40) of the Bankruptcy Code states that the term "means political subdivision or public agency or instrumentality of a State." Thus, although states are not included in the definition, counties are, since counties, like cities, towns, villages, etc., are political subdivisions of a state. Public agencies or instrumentalities of a state include such entities as school districts, water districts, and highway authorities. Since 1994, municipalities have only been eligible to file under chapter 9 if they were specifically authorized to do so by their states. Not all states authorize their municipalities to file under chapter 9. Georgia law explicitly prohibits the state's municipalities from filing. Iowa restricts chapter 9 authorization to those municipalities that become insolvent as a result of an involuntarily incurred debt. In 14 states, municipalities must get approval from a state authority before filing a chapter 9 petition. Twenty-three states have no law addressing authorization to file under chapter 9; therefore, unless a specific law were passed by the state explicitly authorizing their filing, municipalities in those states would be unable seek protection under chapter 9. Simply being a municipality that is authorized by its state to file under chapter 9 is not sufficient for being an eligible chapter 9 debtor. The municipality must also be insolvent. Insolvency in a municipal bankruptcy is determined on a cash flow basis rather than being defined as the condition where liabilities exceed assets; Section 101(32)(C) defines "insolvent" as the financial condition of either generally not paying undisputed debts as they become due or the inability to pay debts as they become due. However, fiscal distress is not sufficient if the municipality has the means of either increasing revenue or reducing costs. To be eligible for chapter 9 protection, an insolvent municipality must be filing for such protection in good faith. Although a municipality is no longer required to submit a plan of adjustment with its bankruptcy petition, it must evidence a desire to implement a plan of adjustment rather than filing under chapter 9 in an attempt to either evade or delay payments to its creditors. Unless it has reason to believe that a creditor may attempt to get an avoidable transfer, the municipality generally must show that it has negotiated with its creditors in good faith or that it is impractical to do so prior to filing the petition. The automatic stay goes into effect when the chapter 9 petition is filed. The stay generally prevents both the initiation and continuation of collection actions by creditors against the municipality. A creditor may, however, ask the bankruptcy court to provide relief from the stay, which the court shall grant in certain circumstances. Chapter 9 provides that the stay does not apply to application of pledged special revenues to the debt secured by those special revenues. Additionally, the stay will not prevent creditors from challenging the municipality's eligibility to file for chapter 9 protection. Filing for chapter 9 does not automatically eliminate the financial stress a municipality is experiencing. The municipality may need additional funds to provide services or to pay for expenses incurred in the administration of the chapter 9 case. By its incorporation of Section 364(c), chapter 9 provides the municipality with the ability to acquire debt that either has priority over administrative expenses or is secured by a lien on the municipality's property. However, some states will not allow their municipalities to borrow to cover operating expenses. Furthermore, unless the lender were to agree otherwise, the entire debt would need to be repaid by the effective date of the plan of adjustment, otherwise the plan could not be confirmed. There are several ways in which the municipal debtor retains control in a chapter 9 case. Generally, there is no trustee in a chapter 9 case. In this way it is similar to a chapter 11. However, in a chapter 9 case, if a creditor so requests, the court may appoint a trustee for the limited purpose of pursuing a cause of action using certain avoidance powers, such as fraudulent or preferential transfers, when a debtor has refused to do so. In a chapter 11, if a trustee is appointed, the trustee takes the place of the debtor in possession, with the same powers and duties. Generally, a trustee is appointed in a chapter 11 case only "for cause" such as fraud, dishonesty, incompetence, or gross mismanagement. Municipal property, including income other than special revenues, remains under the control of the municipality to use as it chooses. It does not become part of an estate that cannot be disposed of without the consent of the bankruptcy court. In a municipal bankruptcy, the municipality retains autonomy in most things. The bankruptcy court cannot interfere with the municipality's political or governmental powers, its property or revenues, or its use or enjoyment of its income-producing property. The municipality in chapter 9 remains subject to control by the state. The bankruptcy court's involvement is generally limited to a few areas. It may determine whether the municipality is eligible to file under chapter 9 and may dismiss cases when appropriate. Approval of assumptions or rejections of executory contracts and confirmation of the municipality's plan of adjustment are also within the purview of the bankruptcy court. Chapter 9 includes § 365 among the sections of the Bankruptcy Code that are applicable in a municipal case. As a result, the municipality, with the approval of the court, may assume executory contracts that are beneficial to the municipality and reject those that are too burdensome. Generally, the standard bankruptcy courts use in approving a debtor's assumption or rejection of an executory contract is the business judgment rule, a standard that generally defers to the debtor's judgment as to what is best for its operations. However, in evaluating assumption or rejection of a collective bargaining agreement (CBA), the courts use a higher standard. In a chapter 11 bankruptcy, rejection of a CBA is subject to the requirements of § 1113 of the Bankruptcy Code. This section requires that three conditions be met before a court can grant a motion to reject a CBA: (1) the debtor must meet the requirements of 11 U.S.C. § 1113(b)(1) by (a) presenting a proposal that both treats all parties equitably and proposes changes necessary for reorganization, and (b) providing the bargaining unit's representative with information needed to evaluate the proposal; (2) the representative must have refused to accept the debtor's proposal without good cause; and (3) "the balance of equities [must] clearly favor[] rejection." Section 1113, which is not among the Bankruptcy Code sections named in § 901(a) as applicable in chapter 9, was added to the Bankruptcy Code following the U.S. Supreme Court's 1984 holding in National Labor Relations Board v. Bildisco and Bildisco . Bildisco held that rejection of a CBA required a higher standard than the business judgment rule, but its requirements were not as stringent as those of § 1113. Under the Bildisco standard, a CBA may be rejected only if the court finds that the agreement is burdensome to the debtor and that, after balancing the equities, rejection is favored. This is the standard generally used for rejecting a CBA in chapter 9.