Proposed Law Would Allow For Municipal Bankruptcy
January 29, 2015
On January 26, 2015, Representative Ron Sandack (R-Downer's Grove) filed HB 298 that would amend the Illinois Municipal Code to allow a city, village or incorporated town to file a petition and exercise power pursuant to federal bankruptcy law. (HB 298)
Mark McClenathan previously analyzed the availability of bankruptcy for Illinois municipalities and concluded that the U.S. Bankruptcy Code only allows a municipality to reorganize its debts under Chapter 9 of the Code when specifically authorized by state law. (Municipal Bankruptcy - Can an Illinois Municipality File for Bankruptcy Protection?). It would appear that HB 298 provides statutory authorization for a city, village or incorporated town to file for bankruptcy protection.
Heyl Royster will continue to track and report on the status of this bill. If your municipality has questions about the potential affect that HB 298 may have on current financing or contractual requirements, please contact any of the attorneys in our Governmental Practice.