Harrisburg, Pa. will file for Chapter 9 bankruptcy

Bankruptcy court building.

Steve Chiotakis: Harrisburg, Pa. will officially file for
municipal bankruptcy. The city council last night narrowly voted to seek Chapter 9 protection. Now the city's buried in at least $300 million of debt from a trash incinerator project.

David Skeel is with the University of Pennsylvania Law School in Philadelphia. David, good morning.

David Skeel: Good morning.

Chiotakis: What does it mean for a city to go bankrupt?

Skeel: Well the first thing it means is that you've hit some insurmountable obstacle, and you've concluded that there is no other way to work things out. In some respects, it means business as usual. The city will continue to negotiate over the terms of a restructuring; most city functions won't be affected. But it does throw them into a completely different world.

Chiotakis: What does it say, David, about the economic climate right now in this country?

Skeel: Well it says that it's a real mess. In the past, it's been very rare for a city of any size to file for Chapter 9. The fact that Harrisburg has filed -- a number of cities and counties are thinking about it seriously -- means we are a long ways from being out of the woods.

Chiotakis: That was my next question -- should we expect to see more cities going this route?

Skeel: I absolutely do think we will, for two reasons. The first is the economic climate that you just alluded to -- it's a mess out here, and out there. The other factor is what happens with the Chapter 9 cases we already have. We have a number of cases over the last year or so -- including one recently in Rhode Island in addition to Harrisburg. If Chapter 9 seems to work -- if it seems to provide a way to restructure some of these obligations and get a city's finances in order -- I think we could see a lot more filings.

Chiotakis: All right. David Skeel from the University of Pennsylvania. David, thank you.

Skeel: It's my pleasure.

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