Tuesday, December 17, 2019
Chapter 9 of the Constitution Bankrupcy - 1358 Words
In order to fully understand the complex issues underlying a Chapter 9 bankruptcy, it is necessary to comprehend the unique United States constitutional challenges to municipal bankruptcy. The main constitutional issue can be boiled down to a clash between State sovereignty over its municipal entities as protected by the Tenth Amendment, and the necessity of a federal bankruptcy system. Any power asserted by a federal bankruptcy court over a State municipality can, if taken too far, interfere with the Stateââ¬â¢s constitutional right to control its municipality. It is this clash of State sovereignty and federal bankruptcy power that is the essence of Chapter 9ââ¬â¢s unique construction. Under the United States Constitution, any valid bankruptcy system must be federally enacted. Two separate provisions of Article I necessitate this conclusion. Article I, Section 10, Clause 1 of the Constitution prohibits any state from passing, ââ¬Å". . . any Bill of Attainder, ex post facto L aw, or Law impairing the Obligation of Contracts, . . . .â⬠No bankruptcy system can realistically exist without the ability to impair the obligations of contracts. The entire purpose of a bankruptcy proceeding is to allow a financially distressed debtor to discharge its debt obligations after paying off as much of its debt as possible. A large majority of a municipal debtorââ¬â¢s debt will come from some contractual obligation that the States are explicitly prohibited from impairing. Therefore, Article I, Section
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