When Recovery Fails: State Intervention and Local Government Bankruptcy

This report outlines options local governments can take if they fail to successfully recover from financial crises. The first option is state intervention; the state government (either directly or through its agents) can encourage the local government to make decisions that will improve financial conditions. The second option is bankruptcy, which governments should seek to avoid. This report answers common questions about local government bankruptcy to aid local government decision-makers in understanding what bankruptcy can and cannot do prior to filing for it.