Municipal bond defaults are on the rise. But that does not necessarily mean that a surge in municipal (Chapter 9) bankruptcies is right around the corner. A municipality must travel a long and winding road before filing a Chapter 9 case—if it can file one at all. Still, as defaults become more common and more cities and localities struggle financially, practitioners may want to learn more about this complicated and less-traveled journey.
In the past year, municipal finances have been strained by the Covid-19 pandemic and recession. Job loss, business closures, event cancellations, decline in leisure and business travel, and ...