Emory Bankruptcy Developments Journal


C. Scott Pryor


Like both public and private entities, common interest communities such as homeowner's associations can experience the problem of financial distress. The ultimate solution to financial distress is relief under the Bankruptcy Code. Private entities are eligible for relief under chapter 11, but municipalities are eligible for relief under chapter 9. Chapter 9 affords municipalities significant protections compared to private entities under chapter 11. Nonetheless, even though common interest communities also provide public goods, they are eligible for relief only under chapter 11 and thus lack the protections afforded by chapter 9. Chapter 11 of the Code should be amended in two ways to afford common interest communities some of the benefits of chapter 9. Without these amendments, common interest communities in financial distress and their members will be less likely to reorganize, and the cost of providing public goods will revert to the local community and its taxpayers.