Federal Chapter 9 Bankruptcy: Stockton and Detroit

http://www.nytimes.com/2013/04/02/bu...=business&_r=0

A federal bankruptcy judge in California yesterday ruled that Stockton could enter Chapter 9. The essay describes may of the issues that arise in municipal bankruptcies. It suggests that if Governor Snyder and Emergency Manager Orr decide that bankruptcy is the best solution for Detroit's financial woes, the process will be slow and much conflicted.
Chrysler was able to exit bankruptcy quickly since the federal government was willing to sell the firm to Sergio Marchionne and FIAT at a fire sale price. Marchionne clearly knew a bargain when he saw one. That is not a model for municipal bankruptcy.
In addition to the Governor and the EM, a federal court would have to approve a Chapter 9 filing for Detroit. That is not automatic. Harrisburgh had even more serious financial troubles than Detroit and filed for Chapter 9. The creditors convinced the federal bankruptcy judge that Harrisburg still had assets that might be sold so the filing was denied.