Chapter 9

AAA

DEFINITION of 'Chapter 9'

A bankruptcy proceeding that provides financially distressed municipalities with protection from creditors by creating a plan between the municipality and its creditors to resolve the outstanding debt. Municipalities include cities, counties, townships and school districts.

INVESTOPEDIA EXPLAINS 'Chapter 9'

The purpose Chapter 9 is to negotiate a repayment plan between the municipality and creditors, which can include reducing the outstanding debt or interest rate, extending the term of the loan and refinancing debts.

It is nearly impossible for a creditor to force the liquidation of a municipality's assets. A municipality is defined by its state and is under state jurisdiction. The 10th Amendment states that any powers not defined in the Constitution are reserved for the state. Bankruptcy proceedings are part of the of the U.S. bankruptcy courts, which are under federal jurisdiction. Because bankruptcy proceedings are not a part of the constitution, the federal courts cannot force a municipality to liquidate.

RELATED TERMS
  1. Chapter 11

    Named after the U.S. bankruptcy code 11, Chapter 11 is a form ...
  2. Mello-Roos

    In the U.S., a form of financing that can be used by cities, ...
  3. Revenue Bond

    A municipal bond supported by the revenue from a specific project, ...
  4. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  5. Private Purpose Bond

    A type of municipal bond that is issued to finance a project ...
  6. Chapter 7

    A bankruptcy proceeding in which a company stops all operations ...
RELATED FAQS
  1. What can cause a merger or acquisition deal to fail?

    When two large companies announce plans to merge, or when the larger of the two acquires the smaller entity, the surviving ... Read Full Answer >>
  2. What happens when a corporation declares bankruptcy?

    When a corporation faces severe financial challenges that cause its inability to repay debt obligations, filing for protection ... Read Full Answer >>
  3. How often can I file bankruptcy?

    Filing bankruptcy is never a simple decision, but sometimes it is the best thing you can do in your current financial situation. ... Read Full Answer >>
  4. How do debt relief options affect my credit score?

    You have several options for reducing your debt burden. You can enroll in a professional debt management plan, or consider ... Read Full Answer >>
  5. How do I find a good personal bankruptcy lawyer?

    While it is not necessary to hire an attorney to file bankruptcy, the rules that govern bankruptcy can be extremely complex, ... Read Full Answer >>
  6. What are some examples of a debt management plan (DMP)?

    Debt management plans, also known as credit counseling programs, can be an excellent debt relief option if you need help ... Read Full Answer >>
Related Articles
  1. Insurance

    Municipal Bond Tips For The Series 7 Exam

    Learn to distinguish between general obligation and revenue bonds to ace this test.
  2. Bonds & Fixed Income

    The Basics Of Municipal Bonds

    Investing in these bonds may offer a tax-free income stream but they are not without risks.
  3. Taxes

    Avoid Tricky Tax Issues On Municipal Bonds

    Learn the rules every investor should know before buying into this "tax-free" investment.
  4. Taxes

    Weighing The Tax Benefits Of Municipal Securities

    Find out how to determine whether the tax exemption offered by "munis" benefits you.
  5. Options & Futures

    Municipalities Free Up Cash With Chapter 9

    Find out what happens to municipalities when they need money, but have no other option than bankruptcy.
  6. Economics

    Understanding Subordinated Debt

    A loan or security that ranks below other loans or securities with regard to claims on assets or earnings.
  7. Mutual Funds & ETFs

    How To Start a Hedge Fund In the United States

    A general overview of how to start a hedge fund firm in the United States, including complying with state and federal regulations.
  8. Mutual Funds & ETFs

    How To Start A Hedge Fund In The UK

    Starting a new hedge fund in the United Kingdom is more complex than in the United States. We discuss UK laws and regulations for starting a new hedge fund.
  9. Mutual Funds & ETFs

    How To Start A Hedge Fund In Canada

    Would-be hedge fund managers in Canada need to understand the laws and regulations that must be followed in order to start a fund in the country.
  10. Taxes

    Is It Smart To Get Dual Citizenship?

    Does it ever make sense to be a citizen of the U.S. and somewhere else? Yes, so you can work minus a visa – not so much, if you get drafted into the army.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center