Causal Factors Leading to Municipal Bankruptcies: A Comparative Case Study

Robert J. Landry and Cynthia S. McCarty

Municipal Finance Journal, 2007, vol. 28, issue 1, 19 - 36

Abstract: Relatively little has been written about Chapter 9 of the Bankruptcy Code, which provides for certain governmental units to seek federal bankruptcy protection. Although municipal bankruptcies are rare, their occurrences inflict widespread suffering over a lengthy time period. Extending the theoretical framework of prior research, this paperanalyzes the underlying causes of two municipal bankruptcies that occurred in Orange County, CA, and Greene County, AL. Although these two counties have strikingly different economies and demographics, we note common systemic problems that contributed to their bankruptcies, propose areas of future research, and suggest ideas for reform.

Date: 2007
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