[quote=BigGovernmentIsGood]
Good lord. You conservatives never cease to amaze me with your ignorance. Please stop watching FoxNews, Rush Limbaugh, Glen Beck and other conservative sources that are making you more retarded by the day and learn to read fact-based news sources like Slate and HuffingtonPost.
From Slate:
Can a state declare bankruptcy? Can a country?
No and no. Chapter 9 of the U.S. bankruptcy code allows individuals and municipalities (cities, towns, villages, etc.) to declare bankruptcy. But that doesn’t include states. (The statute defines “municipality” as a “political subdivision or public agency or instrumentality of a State”—that is, not a state itself.) For one thing, states are said to have sovereign immunity, as protected by the 11th Amendment, which means they can’t be sued. In other words, they don’t need any protection from angry creditors who would take them to court for failing to pay their debts. As a result, states can simply borrow money ad infinitum.
Say the state can’t make its debt payments, and no one will lend it any more money. In that case, the federal government can step in and put the state into receivership. This would involve the assignment of an accountant to manage the state’s debt, overseen by a judge. It would be a lot like bankruptcy, except instead of following a structured set of steps—informing creditors, appointing creditors’ committees, a 120-day window to file a plan, etc.—a receiver has the authority to force creditors to renegotiate loans in a speedy fashion. However, the accountant in charge would not have the power to make decisions about the state’s budget, such as which programs needed to be cut and which taxes had to be raised. (No state has ever gone into receivership.)
Let’s assume for a moment that a state can’t declare bankruptcy – or, more specifically, let’s assume that California can’t declare bankruptcy. Just for argument’s sake, of course, so that there won’t be some great debate over the technical legalities.
The article above – assuming it’s correct – clearly states that “receivership” is “a lot like bankruptcy,” but for some technical and procedural differences.
So the bottom line appears to be that California can end up in a state of affairs – “receivership” – which is, for all intents and purposes, “a lot like bankruptcy.” Consequently, bankruptcy and receivership in the context of the State of California are distinctions without significant differences. To the layperson they look pretty much the same from the outside.
Bankruptcy law is legislated at the federal level. With the exception of cases involving federal entities (e.g., banks via FDIC), most receivership law is legislated at the state level. But, trust me, whether an entity is in receivership or bankruptcy – it’s up shit creek. Debating the difference between the two is like arguing about whether you’d rather have your right leg or left leg amputated. They’re both unpleasant.
