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December 2010 » Accounting for Municipal Bankruptcies
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Sid R. Ewer, PhD, CPA (inactive), CMA, CIA, and John R. Williams, PhD, CPA
The U.S. Bankruptcy Code allows municipalities to file for bankruptcy, but only if the state in which they are located allows its municipal governments to do so. Municipal governments include counties, cities, and towns, as well as special-purpose government entities such as airport authorities and school districts. Only about half of the states allow their local government entities to seek protection from creditors under U.S. bankruptcy law. Exhibit 1 lists these states.
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