Liu, LiliWaibel, Michael2012-05-242012-05-242008-01World Bank, Washington, DChttps://hdl.handle.net/10986/6384Subnational insolvency is a reoccurring event in development, as demonstrated by historical and modern episodes of subnational defaults in both developed and developing countries. Insolvency procedures become more important as countries decentralize expenditure, taxation, and borrowing, and broaden subnational credit markets. As the first cross-country survey of procedures to resolve subnational financial distress, this paper has particular relevance for decentralizing countries. The authors explain central features and variations of subnational insolvency mechanisms across countries. They identify judicial, administrative, and hybrid procedures, and show how entry point and political factors drive their design. Like private insolvency law, subnational insolvency procedures predictably allocate default risk, while providing breathing space for orderly debt restructuring and fiscal adjustment. Policymakers' desire to mitigate the tension between creditor rights and the need to maintain essential public services, to strengthen ex ante fiscal rules, and to harden subnational budget constraints are motivations specific to the public sector.CC BY 3.0 IGOABSOLUTE PRIORITY RULEALLOCATION OF CREDITAPRARREARSASSETSASSETS FOR DISTRIBUTIONASSETS IN BANKRUPTCYBAILOUTBAILOUTSBANK FINANCINGBANK LOANSBANKING SYSTEMBANKRUPTBANKRUPTCYBANKRUPTCY CODEBANKRUPTCY EXEMPTIONBANKRUPTCY PREVENTIONBANKRUPTCY PROCEDURESBANKRUPTCY PROCEEDINGSBANKRUPTCY PROTECTIONBARGAINING POWERBOND MARKETBOND MARKETSBONDHOLDERSBORROWERBUDGET CONSTRAINTBUDGET CONSTRAINTSCAPITAL MARKETCAPITAL MARKETSCHAPTER 13CLAIMCOLLECTIVE ACTIONCOLLECTIVE ACTION PROBLEMCOMMENCEMENT OF BANKRUPTCYCONTINGENT LIABILITIESCONTRACT LAWSCONTRACTUAL RIGHTSCONTRACTUAL RIGHTS OF CREDITORSCORPORATE BANKRUPTCYCORPORATE BANKRUPTCY LAWCORPORATE INSOLVENCYCORPORATE INSOLVENCY LAWCOURT JUDGMENTCOURT ORDERCOURT SYSTEMCREDIT MARKETSCREDITORCREDITOR ACTIONCREDITOR CLAIMSCREDITOR RIGHTSCREDITORSCREDITSCREDITWORTHINESSDEBTDEBT ADJUSTMENTDEBT ADJUSTMENT LAWDEBT ADJUSTMENT PLANDEBT ADJUSTMENT PROCESSDEBT ADJUSTMENTSDEBT COLLECTIONDEBT CRISESDEBT CRISISDEBT FINANCINGDEBT MARKETDEBT MARKETSDEBT OBLIGATIONSDEBT PAYMENTDEBT PAYMENTSDEBT RESTRUCTURINGDEBT RESTRUCTURING MECHANISMDEBT SERVICEDEBT SERVICESDEBTORDEBTOR-CREDITOR RELATIONSHIPDEBTORSDEFAULTSDEFICIT GRANTDEPENDENTDISSOLUTIONDOMESTIC CREDITORSEMERGENCY LOANESTATEEVENT OF DEFAULTFEDERAL BANKRUPTCYFINANCIAL CRISISFINANCIAL DISTRESSFINANCIAL INDICATORSFINANCIAL INSTITUTIONFINANCIAL INSTITUTIONSFINANCIAL MANAGEMENTFINANCIAL MARKETSFINANCIAL POSITIONFINANCIAL REHABILITATIONFINANCIAL RELIEFFINANCIAL REPORTINGFINANCIAL RESOURCESFINANCIAL RESPONSIBILITYFINANCIAL STABILITYFINANCIAL SYSTEMFINANCIAL TROUBLESFISCAL DEFICITFISCAL DEFICITSFISCAL DISTRESSFISCAL REFORMSFORECLOSUREFOREIGN CREDITORSFRAMEWORK FOR INSOLVENCYGOVERNMENT BANKRUPTCYGOVERNMENT GUARANTEEGOVERNMENT GUARANTEESGROUP OF CREDITORSHARD BUDGETINDEBTEDINDIVIDUAL CREDITORINDIVIDUAL CREDITORSINSOLVENCYINSOLVENCY FRAMEWORKINSOLVENCY LAWINSOLVENCY LEGISLATIONINSOLVENCY MECHANISMINSOLVENCY MECHANISMSINSOLVENCY PROCEDUREINSOLVENCY PROCEDURESINSOLVENCY PROCESSINSOLVENCY REGULATIONINSOLVENCY STATUTEINSOLVENCY SYSTEMINSOLVENCY SYSTEMSINSOLVENTINSTITUTIONAL REFORMSINSURANCEINTEREST OF CREDITORSINTEREST RATESINTERNATIONAL CAPITALINTERNATIONAL TRADE LAWINTRODUCTION OF INSOLVENCYIRRESPONSIBLE BORROWINGJUDGEJUDGMENTJUDGMENTSJUDICIAL PROCEDURESJUDICIAL SYSTEMJUDICIARYJURISDICTIONLACK OF TRANSPARENCYLEGAL FRAMEWORKLEGAL PROCEDURELEGAL PROCEDURESLEGAL REMEDIESLEGISLATIVE FRAMEWORKLENDERLENDERSLEVERAGELIQUIDATIONLIQUIDITYLITERATURE ON BANKRUPTCYLOCAL DEBTLOCAL GOVERNMENT DEBTMAJORITY OF CREDITORSMARKET VALUEMECHANISMS FOR INSOLVENCYMISMANAGEMENTMORTGAGESMUNICIPAL ASSETSMUNICIPAL BANKRUPTCYMUNICIPAL BANKRUPTCY CASESMUNICIPAL BORROWINGMUNICIPAL DEBTMUNICIPAL DEBT ADJUSTMENTMUNICIPAL DEFAULTMUNICIPAL DEFAULTSMUNICIPAL INSOLVENCYNATIONAL DEBTNEGOTIATIONNEGOTIATIONSOUTSIDE BANKRUPTCYPARTIAL IMMUNITYPOSSESSIONPOSSESSION FINANCINGPOTENTIAL LIABILITIESPOWER OF CREDITORSPRIORITY OF CREDITORPRIVATE CREDITORSPRIVATE INVESTMENTSPRIVATE LAWREGULATORY FRAMEWORKREGULATORY REFORMSRELIEF FROM CREDITORSREMEDYREORGANIZATIONREORGANIZATION PROCEDURESREPAYMENTREPAYMENT OF CREDITORSREPAYMENT OF DEBTRESTRUCTURING PLANRESTRUCTURING PROCESSRISK OF DEBTROLE OF COURTSSALARYSATISFACTION OF CREDITORSATISFACTION OF CREDITORSSECURED DEBTSHORT-TERM DEBTSSIMILARLY SITUATED CREDITORSSINGLE DEBTSOVEREIGN DEBTSTATE DEBTTRUSTEEUNSECURED CREDITORSUNSECURED DEBTWAGESWORKOUTWORKOUTSWorld Bank10.1596/1813-9450-4496