Template-type: ReDIF-Paper 1.0
Author-Name: John L. Mikesell	
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Title: Subnational Government Bankruptcy, Defaul, and Fiscal Crisis in the United States
Abstract: Like individuals and businesses, subnational governments sometimes face financial
 difficulties. Subnational government can get into financial problems in various ways, 
 sometimes through economic or social misfortune; sometimes through incompetence or 
 malevolence; sometimes through a stubborn unwillingness to make tough budgetary choices;
 and often through a combination of these causes. For creditors and citizens of those 
 governments, the cause is less significant than the result -- unnecessarily high taxes or
 woefully inadequate government services or both. The standards for establishing bankruptcy
 of an economic entity (whether an individual, corporation, or another unit, such as a 
 local government) differ from country to country. However, the concept generally means 
 that the entity is unable to pay its debts as they come due or to pay its debts in 
 full.1 Bankruptcy or insolvency law in many countries provides for the development of 
 a plan that allows the debtor to resolve these debts through division of assets among the
 creditors in a way that treats the interests of the creditors with some measure of 
 fairness. The intention is to protect the entity from its creditors so that the assets
 may be distributed equitably among the creditors and the debtor can be discharged from 
 further liability. The idea is to provide “breathing room” so that the debtor has some 
 opportunity to make things right and may continue to exist if at all possible. The 
 protection is usually through a specialized court or administrative body. The fresh start
 that bankruptcy affords is presumed beneficial to both the debtor and the creditors. Of
 course, some entities are beyond hope and the process leads toward complete financial 
 liquidation rather than rehabilitation. 
Keywords: subnational governments, bankruptcy, fiscal crisis, united states
Length: 12 pages
Creation-Date: 2002-12-01
File-URL:http://icepp.gsu.edu/files/2015/03/ispwp0221.pdf
File-Format:application/pdf
Handle: RePEc:ays:ispwps:paper0221