Chapter 9

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.

BREAKING DOWN '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. Municipal Bond Fund

    A mutual fund that invests in municipal bonds, or "munis." Municipal ...
  2. Municipal Bond

    A debt security issued by a state, municipality or county to ...
  3. Net Debt To Assessed Valuation

    In a municipal bond issue, a ratio measuring the value of the ...
  4. Municipal Investment Trust

    A type of unit investment trust (UIT) that invests solely in ...
  5. Net Debt To Estimated Valuation

    A ratio comparing the net value of a municipal bond issue to ...
  6. Triple-Tax-Free

    An investment (usually a municipal bond) featuring interest payments ...
Related Articles
  1. 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.
  2. Professionals

    MUNICIPAL BONDS

    The Municipal Securities Rule Making Board or the MSRB is the organization responsible for overseeing the municipal securities industry. The MSRB has no enforcement arm and its only function ...
  3. Mutual Funds & ETFs

    How to Find the Best Bets in Muni Bonds

    Approach investing in municipal bonds the same as you would investing in stocks.
  4. Mutual Funds & ETFs

    The Top 5 Municipal Bond ETFs for 2016

    Learn about exchange-traded funds that invest in municipal bonds issued by local U.S. municipalities with returns on bonds exempted from federal tax.
  5. Bonds & Fixed Income

    A Look at the Pros and Cons of Muni Bonds

    Considering muni bonds? Here's a look at their pros and cons.
  6. Professionals

    Municipal Securities

    Finra Series 7 Online Study Guide Section 5 Municipal Securities
  7. Mutual Funds & ETFs

    4 Tax-Free Muni Bond ETFs to Consider

    Tax free municipal bond ETFs are an excellent way to build wealth slowly. Here are 4 you should consider.
  8. Professionals

    Zero-Coupon and Municipal Bonds

    Zero-Coupon and Municipal Bonds
  9. Bonds & Fixed Income

    What Is A Municipal Bond?

    A municipal bond is a debt instrument used by a city, state, county or other local government authority to raise money for a project. Municipal bonds, often called munis, are considered a debt ...
  10. Professionals

    Municipal Bond Analysis

    Municipal Bond Analysis
RELATED FAQS
  1. What is the difference between municipal bonds and standard money market funds?

    The primary difference between municipal bonds - also known as "munis" - and money market funds is that municipal bonds are ... Read Answer >>
  2. How can you use a debt service coverage ratio (DSCR) to evaluate municipal bonds?

    Learn how the debt service coverage ratio (DSCR) can be used by investors to analyze the risk level of revenue bonds offered ... Read Answer >>
  3. What happens when a corporation declares bankruptcy?

    Understand what options are available to corporations under bankruptcy protection, and learn what takes place after bankruptcy ... Read Answer >>
  4. What is a triple tax-free municipal bond?

    At its core, a triple tax-free municipal bond is just like any corporate bond: it is a debt instrument, a loan given to a ... Read Answer >>
  5. How do the returns on municipal bonds compare to those of other bonds?

    Learn how tax-free municipal bonds may provide better returns than other types of bonds, and understand the risks of municipal ... Read Answer >>
  6. What are the differences between chapter 7 and chapter 11 bankruptcy?

    Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center