12 June 2014

At Last! -- Download Municipal Bankruptcy: When Doing Less Is Doing Best

You can go here to download my recently published article Municipal Bankruptcy: When Doing Less Is Doing Best, which can otherwise be found at 88 Amer. Bankr. L.J. 85. I've referred to it in previous posts here, here, and here in connection with the bankruptcies of Stockton and Detroit. In it I make several arguments but the most important relates to the possibility of "cramdown" of the plans of those cities.

In short, but very importantly, no plan should be crammed down if it "discriminates unfairly" against a dissenting class of unsecured creditors. In practical terms this means that under Chapter 9, unlike Chapter 11 corporate reorganizations, there is very little room to give retirees a greater recovery than "regular" unsecured creditors like bondholders.

But equally the case, no plan can be confirmed if it is not in the 'best interests" of creditors including retirees who under state law would come out ahead of bondholders. A fine kettle of fish Oliver Hardy might say.

So what's the court to do when the irresistible force of unfair discrimination meets the immovable object of best interests? For the answer to that question, read my article!

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