U.S. Code » Title 11 » Chapter CHAPTER 9— ADJUSTMENT OF DEBTS OF A MUNICIPALITY › Subchapter SUBCHAPTER I— GENERAL PROVISIONS

11 U.S.C. § 903

Reservation of State power to control municipalities

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This 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 such municipality, including expenditures for such exercise, but—(1) a State law prescribing a method of composition of indebtedness of such municipality may not bind any creditor that does not consent to such composition; and(2) a judgment entered under such a law may not bind a creditor that does not consent to such composition.(Pub. L. 95–598, Nov. 6, 1978, 92 Stat. 2622; Pub. L. 98–353, title III, § 492, July 10, 1984, 98 Stat. 383.)Historical and Revision Noteslegislative statements

Section 903 of the House amendment represents a stylistic revision of section 903 of the Senate amendment. To the extent section 903 of the House bill would have changed present law, such section is rejected.

senate report no. 95–989

Section 903 is derived, with stylistic changes, from section 83 of current Chapter IX [section 403 of former title 11]. It sets forth the primary authority of a State, through its constitution, laws, and other powers, over its municipalities. The proviso in section 83, prohibiting State composition procedures for municipalities, is retained. Deletion of the provision would “permit all States to enact their own versions of Chapter IX [chapter 9 of former title 11]”, Municipal Insolvency, 50 Am.Bankr.L.J. 55, 65, which would frustrate the constitutional mandate of uniform bankruptcy laws. Constitution of the United States, Art. I, Sec. 8.

This section provides that the municipality can consent to the court’s orders in regard to use of its income or property. It is contemplated that such consent will be required by the court for the issuance of certificates of indebtedness under section 364(c). Such consent could extend to enforcement of the conditions attached to the certificates or the municipal services to be provided during the proceedings.

Editorial NotesAmendments

1984—Par. (2). Pub. L. 98–353 struck out “to” before “that does not consent”.

Statutory Notes and Related SubsidiariesEffective Date of 1984 Amendment

Amendment by Pub. L. 98–353 effective with respect to cases filed 90 days after July 10, 1984, see section 552(a) of Pub. L. 98–353, set out as a note under section 101 of this title.

Notes of Decisions
Cited in 42 cases (5 in the last 5 years), 1984–2026 · leading case: Puerto Rico v. Franklin California Tax-Free Trust, 195 L. Ed. 2d 298 (2016).
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Puerto Rico v. Franklin California Tax-Free Trust, 195 L. Ed. 2d 298 (2016). · cites it 5× “They contended, among other things, that a Bankruptcy Code provi- sion explicitly pre-empts the Recovery Act, see 11 U. S. C. §903 (1). The District Court enjoined the Act’s enforcement, and the First Cir- cuit affirmed, concluding that the Bankruptcy Code’s definition of…”
City of Pontiac Retired Employees v. Louis Schimmel, 751 F.3d 427 (6th Cir. 2014). · cites it 5× “” 11 U.S.C. § 903 (1). The plain language of this section is not limited to bankruptcy proceedings.”
Franklin California Tax-Free v. Commonwealth of Puerto Rico, 542 B.R. 322 (1st Cir. 2015). · cites it 9× “Fearing that a PREPA filing under the Recovery Act was imminent, they brought suit in summer 2014 to challenge the Recovery Act's validity and enjoin its implementation.”
Franklin California Tax-Free Trust v. Puerto Rico, 85 F. Supp. 3d 577 (D.P.R. 2015). · cites it 8× “11 U.S.C. § 903 (emphasis added). Thus, by enacting section 903(1), Congress expressly preempted state laws that prescribe a method of composition of municipal indebtedness that binds nonconsenting creditors.”
Walter Shuker v. Smith & Nephew PLC, 885 F.3d 760 (3rd Cir. 2018). “2d 298 (2016) (discussing 11 U.S.C. § 903 (1) ), but that case did not address preemption of claims invoking "historic .”
In re Jefferson Cnty., 474 B.R. 228 (Bankr. N.D. Ala. 2012). · cites it 4× “…support of abstention from the County’s bankruptcy case are by invocation of § 903 and § 904 of the Bankruptcy Code, 11 U.S.C. §§ 903 , 904, along with the Tenth Amendment to the U.S. Constitution. The argument is somewhat akin to the 11 U.S.C. § 364 (b)(4) police and…”
Lyda v. City of Detroit, Mich. (In Re City of Detroit, Mich.), 561 B.R. 684 (6th Cir. 2016). “11 U.S.C. § 903 . Section 904 “is a keystone in the constitutional arch between federal bankruptcy power and state sovereignty.”
In re Jefferson Cnty., 484 B.R. 427 (Bankr. N.D. Ala. 2012). · cites it 3× “Furthermore, the concept that the United States can require a state or its municipal body, which is merely a delegation to a subpart of a state, to comply with a state’s laws via a federal statute is, at a minimum, inconsistent with, if not in derogation of, a state’s…”
Assured Guar. Corp. v. Garcia-Padilla, 214 F. Supp. 3d 117 (D.P.R. 2016). · cites it 3× “11 U.S.C. § 903’s Preemption of Puer-to Rico Laws “Chapter 9 governs the adjustment of debts of a municipality, 11 U.”
Ass'n of Retired Employees v. City of Stockton (In re City of Stockton), 478 B.R. 8 (Bankr. E.D. Cal. 2012). · cites it 2× “A A pair of chapter 9 provisions honors state-federal balance by reserving certain state powers and by correlatively limiting the powers of the federal court: 11 U.S.C. §§ 903 and 904. 1 Section 903 reserves to the state the power to control political and governmental powers, as…”
In Re City of Vallejo, 403 B.R. 72 (Bankr. E.D. Cal. 2009). · cites it 2× “” To harmonize these two competing interests—reservation of powers to the states and the supremacy of federal bankruptcy law—Congress enacted 11 U.S.C. § 903 . Section 903 provides, in relevant part: “This chapter does not limit or impair the power of a State to control, by…”
Craig Serafino v. City of Hamtramck, Mich., 707 F. App'x 345 (6th Cir. 2017). “§ 1983 for violations of the Constitution’s (1) Contracts Clause, (2) Takings Clause, and (3) Due Process Clause; (4) a violation of the Bankruptcy Code, 11 U.S.C. § 903 ; and (5) a breach-of-contract action under Michigan law.”
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