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CHAPTER 9 BANKRUPTCY Riverside Bankruptcy Attorney
What is a Chapter 9 Bankruptcy?
A lesser recognized Chapter of bankruptcy that is particularly designed for “municipalities,” which includes counties, taxing districts, cities, towns, municipal utilities, and school districts.
Under Chapter 9 bankruptcy municipalities are allowed to restructure their debt by extending the timeline on debt refinancing, repaying debts, or the reduction of principal or interest on existing debts. The assets of a municipality are not liquidated under a Chapter 9 bankruptcy.
A discharge is received by a municipal debtor in a Chapter 9 case is after:
(1) confirmation of the plan;
(2) deposit by the debtor of any consideration to be distributed under the plan with the disbursing agent appointed by the court; and
(3) a determination by the court that securities deposited with the disbursing agent will constitute valid legal obligations of the debtor and that any provision made to pay or secure payment of such obligations is valid.
Thus, the discharge is conditioned not only upon confirmation, but also upon deposit of the consideration to be distributed under the plan and a court determination of the validity of securities to be issued.
In Chapter 9 cases. There are two exceptions to the discharge
(1) any debt excepted from discharge by the plan or order confirming the plan.
(2) a debt owed to an entity that, before confirmation of the plan, had neither notice nor actual
knowledge of the case.
At any time within 180 days after entry of the confirmation order, the court may, after notice and a hearing, revoke the order of confirmation if the order was procured by fraud.
The difference between cases filed under other Chapters compared to Chapter 9 is that the clerk of the court does not automatically assign the case to a particular judge.
Depending on where the case originates the chief judge of the court of appeals for the circuit of that district designates the bankruptcy judge to conduct the case. This procedure of assigning a bankruptcy judge to a case ensures that there will be no issue of which judge will preside over the Chapter 9 case of a major municipality and to that a municipal case will be handled by a judge who has the time and capability of doing so.
Proofs of Claim
In a Chapter 9 case, the court fixes the time within which proofs of claim or interest may be filed. Many creditors may not be required to file a proof of claim in a Chapter 9 case.
For instance, a proof of claim is deemed filed if it appears on the list of creditors filed by the debtor, unless the debt is listed as disputed, contingent, or unliquidated.