Housing
The Difference Between Chapter 9 and Other Types of Bankruptcy
Detroit is activating a specific section of the U.S. bankruptcy code that applies to municipalities.
On Thursday afternoon, Detroit became the largest municipality in American history to file for bankruptcy. After teetering on the brink for several months, the city, under the leadership of state-appointed emergency manager Kevyn Orr, has officially entered Chapter 9 bankruptcy proceedings.
In the U.S., there are six main types of bankruptcy. The most common form, Chapter 7, applies to individuals, while the often-in-the-news Chapter 11 is used for corporate rehabilitation. Detroit is activating the much more rarely used Chapter 9, a specific section of the U.S. bankruptcy code that applies to municipalities, and which can include tax districts, municipal utilities, and school districts as well as cities and towns.