Buried deeply in this
article reported by Reuters:
Under a change to Chapter 9 bankruptcy law that was made while New
York was in difficulties in the 1970s, municipalities can instead argue
that good-faith negotiations are impractical.
Detroit has made this argument.
"Despite the ultimate impracticability of such negotiations, the
City nevertheless attempted, where possible, to negotiate with its
various creditor constituencies in good faith," Detroit said in court
papers.
Because municipal bankruptcies are rarer than corporate ones, there
are fewer precedents. But Detroit can point to a ruling from June
involving the California city of Stockton to make its case.
U.S. Bankruptcy Judge Christopher Klein in Sacramento ruled that
even if Stockton had not negotiated in good faith, it was still eligible
for bankruptcy because such negotiations would have been impractical
given it had 2,400 retirees.
It's an interesting article.
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