University of Miami Business Law Review

Document Type



The 1930s saw the nation in crisis, steeped in the worst of the Great Depression. In 1936, over 2,000 municipalities, counties, and other governmental units, in 41 of the 48 states, were known to be in default. In response to this crisis, Congress amended the Bankruptcy Act in 1934 and passed the first municipal bankruptcy statute. Shortly thereafter, the Supreme Court struck it down. Undeterred, Congress passed another municipal bankruptcy statute in 1937, which was almost identical to the previously invalidated law. In 1938, the Supreme Court, now stocked with Roosevelt-appointed New Deal sympathizers, upheld the law.

However, the latter case, while perhaps correctly decided, was woefully lacking in analysis. Since that time, no court has engaged in the appropriate legwork to make a case for both the need and constitutionality of a municipal bankruptcy statute. This paper aims to connect the dots between Chapter 9, the Contract Clause, and the Tenth Amendment to establish that, while Chapter 9 is undoubtedly constitutional, the Supreme Court overstated its necessity, and its necessity remains overstated today.