State Bankruptcy

Extracted Attributes

• Primary Causes

  Maturity mismatch, currency mismatch, and fiscal insolvency

• Alternative Name

  Sovereign default

• US Legal Framework

  Title 11 of the United States Code (Bankruptcy Code)

• Common Consequences

  Exclusion from credit markets, seizure of overseas assets, and political pressure

• Intervention Methods

  Austerity measures, debt restructuring, and IMF conditional loans

• Municipal Relief Mechanism

  Chapter 9 Bankruptcy

Timeline

• The United Kingdom invades Egypt following a failure to pay back sovereign debt. (Source: Wikipedia)

  1882-01-01

• The United States employs 'gunboat diplomacy' in Venezuela regarding debt defaults. (Source: Wikipedia)

  1895-01-01

• The United States begins an occupation of Haiti to enforce creditor rights. (Source: Wikipedia)

  1915-01-01

• The United States Congress enacts the Bankruptcy Code, establishing uniform federal bankruptcy laws. (Source: US Courts)

  1978-11-06

• The global financial crisis begins, eventually forcing Spain and Portugal to shift trade balances to avoid default. (Source: Wikipedia)

  2008-09-15

• The Greek bailout agreement is signed, involving IMF loans conditional on austerity. (Source: Wikipedia)

  2010-05-01

Sovereign default

A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full when due. Cessation of due payments (or receivables) may either be accompanied by that government's formal declaration that it will not pay (or only partially pay) its debts (repudiation), or it may be unannounced. A credit rating agency will take into account in its gradings capital, interest, extraneous and procedural defaults, and failures to abide by the terms of bonds or other debt instruments. Countries have at times escaped some of the real burden of their debt through inflation. This is not "default" in the usual sense because the debt is honored, albeit with currency of lesser real value. Sometimes governments devalue their currency. This can be done by printing more money to apply toward their own debts, or by ending or altering the convertibility of their currencies into precious metals or foreign currency at fixed rates. Harder to quantify than an interest or capital default, this often is defined as an extraneous or procedural default (breach) of terms of the contracts or other instruments. If potential lenders or bond purchasers begin to suspect that a government may fail to pay back its debt, they may demand a high interest rate in compensation for the risk of default. A dramatic rise in the interest rate faced by a government due to fear that it will fail to honor its debt is sometimes called a sovereign debt crisis. Governments may be especially vulnerable to a sovereign debt crisis when they rely on financing through short-term bonds, since this creates a maturity mismatch between their short-term bond financing and the long-term asset value of their tax base. They may also be vulnerable to a sovereign debt crisis due to currency mismatch: if few bonds in their own currency are accepted abroad, and so the country issues mainly foreign currency-denominated bonds, a decrease in the value of their own currency can make it prohibitively expensive to pay back those bonds (see original sin). Since a sovereign government, by definition, controls its own affairs, it cannot be obliged to pay back its debt. Nonetheless, governments may face severe pressure from lending countries. In a few extreme cases, a major creditor nation, before the establishment of the UN Charter Article 2 (4) prohibiting use of force by states, made threats of war or waged war against a debtor nation for failing to pay back debt to seize assets to enforce its creditor's rights. For example, in 1882, the United Kingdom invaded Egypt. Other examples are the United States' "gunboat diplomacy" in Venezuela in the mid-1890s and the United States occupation of Haiti beginning in 1915. Today, a government that defaults may be widely excluded from further credit; some of its overseas assets may be seized; and it may face political pressure from its own domestic bondholders to pay back its debt. Therefore, governments rarely default on the entire value of their debt. Instead, they often enter into negotiations with their bondholders to agree on a delay (debt restructuring) or partial reduction of their debt (a 'haircut or write-off'). Some economists have argued that, in the case of acute insolvency crises, it can be advisable for regulators and supranational lenders to preemptively engineer the orderly restructuring of a nation's public debt – also called "orderly default" or "controlled default". In the case of Greece, economists generally believed that a delay in organising an orderly default would hurt the rest of Europe even more. The International Monetary Fund often lends for sovereign debt restructuring. To ensure that funds will be available to pay the remaining part of the sovereign debt, it has made such loans conditional on action such as reducing corruption, imposing austerity measures such as reducing non-profitable public sector services, raising the tax take (revenue) or more rarely suggesting other forms of revenue raising such as nationalization of inept or corrupt but lucrative economic sectors. A recent example is the Greek bailout agreement of May 2010. After the 2008 financial crisis, to avoid a sovereign default, Spain and Portugal, among other countries, turned their trade and current account deficits into surpluses.

Web Search Results

• Which States Have the Most Bankruptcy Filings in America?

  | State | Chapter 13 (%) | Chapter 7 (%) | --- | Georgia | 68.4% | 31.6% | | Alabama | 64.2% | 35.8% | | Tennessee | 59.1% | 40.9% | | Mississippi | 56.7% | 43.3% | | Louisiana | 53.3% | 46.7% | | South Carolina | 50.9% | 49.1% | | North Carolina | 47.5% | 52.5% | | Texas | 45.2% | 54.8% | | Illinois | 41.7% | 58.3% | | Michigan | 39.5% | 60.5% | [...] In 2024, California led the nation in the number of bankruptcy filings, followed by Florida, Texas, Georgia, and Illinois. California had 47,621 filings, while Florida had 37,156, and Texas had 31,520. Georgia and Illinois followed with 28,383 and 25,997 filings, respectively. Key 2024 Statistics: ### Bankruptcy Filings in the U.S. (2015–2025) Line chart showing U.S. bankruptcy filings decreasing from 860,000 in 2015 to 645,000 in 2023, then rising to 740,000 in 2025. [...] | State | Filings per 100K | Total Filings (2024) | --- | Alabama | 527.3 | 119,730 | | Georgia | 514.6 | 158,860 | | Mississippi | 483.1 | 87,425 | | Tennessee | 478.9 | 126,350 | | Kentucky | 472.5 | 98,113 | | Indiana | 458.2 | 132,024 | | Nevada | 442.1 | 104,222 | | Missouri | 430.4 | 112,708 | | Michigan | 423.6 | 139,920 | | Arkansas | 417.2 | 79,810 | ## Which Regions of the U.S. Have the Most Bankruptcies?

• Process - Bankruptcy Basics

  There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk's offices. [...] Article I, Section 8, of the United States Constitution authorizes Congress to enact "uniform Laws on the subject of Bankruptcies." Under this grant of authority, Congress enacted the "Bankruptcy Code" in 1978. The Bankruptcy Code, which is codified as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases. [...] The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts. Much of the bankruptcy process is administrative, however, and is conducted away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter

• Bankruptcy | California Courts | Self Help Guide

  Bankruptcy is governed by federal law, not California law. This guide provides basic information and resources, but there are no specific California state forms and you don't file with your county court, as you might for other legal matters. Federal bankruptcy forms ### Decide if bankruptcy is an option for you Since there are different types of bankruptcy, one may be better for you than another, or bankruptcy may not be a good solution for your type of problem at all. [...] Bankruptcy is a legal process to help people who owe money, or debtors, get relief from debts they cannot pay and, at the same time, help people who are owed money, or creditors, get paid from assets property the debtor has. After a bankruptcy, the debtor is no longer legally required to pay any debts that are eliminated, or discharged, in bankruptcy court. [...] Chapter 7 is the most common form of bankruptcy for individuals. The court sells all your assets (except assets that are exempt) for cash and then pays your creditors. You must make less than a certain amount of money to qualify. Chapter 11 bankruptcy is usually for corporations because of its complexity, but individuals can file too. The debtor usually keeps their assets and continues to operate the business while working on a plan to pay off the creditors.

• Chapter 9 - Bankruptcy Basics

  Similarly, 11 U.S.C. § 903 states that "chapter does not limit or impair the power of a State to control, by legislation or otherwise, a municipality of or in such State in the exercise of the political or governmental powers of the municipality, including expenditures for such exercise," with two exceptions – a state law prescribing a method of composition of municipal debt does not bind any non-consenting creditor, nor does any judgment entered under such state law bind a nonconsenting [...] Only a "municipality" may file for relief under chapter 9. 11 U.S.C. § 109(c). The term "municipality" is defined in the Bankruptcy Code as a "political subdivision or public agency or instrumentality of a State." 11 U.S.C. § 101(40). The definition is broad enough to include cities, counties, townships, school districts, and public improvement districts. It also includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge [...] Section 109(c) of the Bankruptcy Codes sets forth four additional eligibility requirements for chapter 9: 1. the municipality must be specifically authorized to be a debtor by state law or by a governmental officer or organization empowered by State law to authorize the municipality to be a debtor; 2. the municipality must be insolvent, as defined in 11 U.S.C. § 101(32)(C); 3. the municipality must desire to effect a plan to adjust its debts; and 4. the municipality must either:

• Bankruptcy

  Individuals may file Chapter 7 or Chapter 13 bankruptcy, depending on the specifics of their situation. Municipalities—cities, towns, villages, taxing districts, municipal utilities, and school districts may file under Chapter 9 to reorganize. Businesses may file bankruptcy under Chapter 7 to liquidate or Chapter 11 to reorganize. Chapter 12 provides debt relief to family farmers and fishermen. Bankruptcy filings that involve parties from more than one country are filed under Chapter 15. [...] Filing bankruptcy can help a person by discarding debt or making a plan to repay debts. A bankruptcy case normally begins when the debtor files a petition with the bankruptcy court. A petition may be filed by an individual, by spouses together, or by a corporation or other entity. All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code. [...] There are different types of bankruptcies, which are usually referred to by their chapter in the U.S. Bankruptcy Code.