Proposed Bankruptcy Bill for Cities, Towns in Indiana

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The Indiana General Assembly will consider a proposed bankruptcy bill mooted by Sen. Ed Charbonneau that will give provision for local units of government, including school districts that are struggling financially, to file for Chapter 9 bankruptcy protection. The bill has been called the ‘Bankruptcy Bill’ but Charbonneau and state budget officials prefer referring to it as a ‘Bankruptcy avoidance’ bill. As the name suggests, it is aimed at averting the financial collapse of local communities.

If the bill is passed, it might impose stricter financial disciplines on local community leaders who are having difficulty solving their financial problems. Under a provision of the bill, a local government unit or one of its major creditors could petition the state to appoint an emergency manager to take over the powers of the local executive and the fiscal branch of that government unit. This emergency manager would be empowered to impose strict cost-cutting measures that may include renegotiations of contracts and job layoffs. For a creditor or group of creditors to petition for an emergency manager, they must be owed at least 30% of the local unit of government’s annual revenue.

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Tampa Bay Bankruptcy Center, P.A. on:

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