Strained Municipalities Struggle as Chapter 9 Usefulness Wanes

Chapter 9 bankruptcy filings for municipalities were low for a second consecutive year, signaling the tool may have outlived its usefulness even as some cities and towns struggle financially.

Only five municipalities filed for bankruptcy in the past two years, according to BankruptcyData. But municipalities face distress as bonds come due, pension obligations grow, and grants from the federal government are threatened by President Donald Trump’s administration, academics and industry professionals said.

Many cities and towns don’t have formal bankruptcy as an option to cure financial strain, as only about half of states permit Chapter 9. And strict eligibility requirements ...