Michigan Democrat Rep. John Conyers has introduced legislation that would make it much harder for municipalities to restructure their debt through bankruptcy.

The Protecting Employees and Retirees in Municipal Bankruptcies Act of 2015, introduced earlier this week, would alter the U.S. bankruptcy code in several key ways. In remarks submitted to the Congressional Record, Conyers, a Detroit native, said his bill would provide protection for public employees and pensioners who have dedicated their lives to helping their fellow citizens.

"When a municipality files for bankruptcy, its employees and retirees who have devoted their lives to public service — such as police officers, firefighters, sanitation workers and office personnel — risk having their hard-earned wages, pensions and health benefits cut or even eliminated," Conyers said.

"My legislation addresses this risk by requiring the municipality to engage in meaningful good faith negotiations with its employees and retirees before the municipality can apply for Chapter 9 bankruptcy relief."

Under the proposed legislation, a distressed municipality would have to show a bankruptcy court by "clear and convincing evidence" that it had met the filing eligibility requirements.

Vincent Marriott, a partner at Ballard Spahr in Philadelphia, said recent bankruptcy opinions in Stockton, Calif. and Detroit have hinged on a lesser "preponderance of the evidence" standard.

Related Practices

Bankruptcy, Reorganization, and Capital Recovery
Municipal Recovery