The state is a sovereign, no different from the federal government.
The ongoing public debate regarding the possible need to amend the Bankruptcy Code to permit sovereign states to seek bankruptcy protection should consider the essential nature of the state as a sovereign when considering the state as debtor. Although the section of the Bankruptcy Code designated for municipal debtors—Chapter 9—is unavailable to the sovereign states, because municipalities are adjuncts of the state and partake of the state’s sovereignty, it provides a useful analogy to the type of relief that might be offered to states if Congress were to amend the Bankruptcy Code to allow states to seek bankruptcy protection.
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