Latest / The Fiscal Policy Podcast with Fexingo: Government Budgets, Stimulus, and Public Spending
How Municipal Bankruptcy Actually Works
When a city runs out of money, it can't just shut down. Municipal bankruptcy — specifically Chapter 9 — is a rarely used but powerful legal tool that allows cities to restructure debt while continuing basic services. In this episode, Lucas and Luna break down how Chapter 9 works using the case of Detroit's 2013 filing: the largest municipal bankruptcy in U.S. history. They walk through the process — from filing to eligibility to the 'good faith' negotiation requirement — and explain why pension obligations, not bondholders, took the biggest haircut in Detroit. They also…
The skinny
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