US Government Debt Different - Finance Department - University of ...

196 United States Sovereign Debt: A Thought Experiment On Default And Restructuringthe Bankruptcy Code 64 to allow the U.S. to propose a restructuringplan. Because the restructuring should be accomplished immediatelyon the record date, it would be necessary to propose the restructuringas contemplated by Alternative 1 at the commencement of thebankruptcy case. 65 The legislation might plausibly confer jurisdictionto handle a sovereign debtor case on any federal District Court in thecase of the U.S. government and on any District Court sitting in adebtor state in the case of a state of the U.S. 66As to substance, Chapter 9 on Adjustment of Debts of a Municipalitymight provide a template or checklist of sorts inasmuch as it setsout markers on which provisions of the Bankruptcy Code are appropriatefor a government debtor and which are not. 67 At least two ofChapter 9’s requirements for confirmation of a plan of adjustment ofa debtor’s debts might be troublesome if applicable to a plan alongthe lines of Alternative 1. First, Plan confirmation requires acceptanceby at least one class of impaired claims, not taking into accountthe claims of “insiders.” 68 It is doubtful that the holders of impairedclaims based on non-exempted Treasuries would accept a plan thatoffered the Prosperity Shares in lieu of more substantial payments orother value. Perhaps another class of claims could be impaired witha better chance of acceptance, such as claims held by Federal ReserveBanks. On the other hand, those claims might be considered insiderclaims.Second, assuming that the classes of claims that include the holdersof non-exempted Treasuries would not accept the plan, in order toinvoke the cramdown provisions of Chapter 9 for confirmation notwithstandingsuch nonacceptance, the plan must “not discriminateunfairly” with respect to nonaccepting classes of claims. 69 Discrimi-64 11 U.S.C. §§ 101-1530.65 To reiterate, the alternatives presented here are illustrative so as to facilitate aconcrete discussion.66 I make no attempt here in these few pages to address the myriad details of sucha bankruptcy law.67 See 6 Collier on Bankruptcy (Alan N. Resnick & Henry J. Sommer, eds., 16thed. 2011) 900.01[2][c] (discussing differences between Chapter 9 and Chapter 11as to court involvement with operations of debtor).68 11 U.S.C. §§ 901(a), 1129(a)(10).69 11 U.S.C. §§ 901(a), 1129(b)(1).