Sec. 205. Default by the Commonwealth or a municipality of the Commonwealth
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/bill/114/s/3044/is/section-205·A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
An entity may file an application with the Corporation under this title if and only if such entity— is a municipality or the Commonwealth; is specifically authorized, in its capacity as a municipality or the Commonwealth or by name, to file an application with the Corporation under this title by Commonwealth law, by the Corporation itself, or by a governmental officer or organization empowered by Commonwealth law to authorize such entity to file an application with the Corporation under this title; desires to and is authorized by Commonwealth law, by the Corporation itself, or by a governmental officer or organization empowered by Commonwealth law to make such authorization to restructure its Bond debts; and has obtained the agreement of creditors holding at least a majority in amount of the claims that such entity intends to impair under a plan in a case under this title; has negotiated in good faith with creditors and has failed to obtain the agreement of creditors holding at least a majority in amount of the claims of each class that such entity intends to impair under a plan in a case under this title; or is unable to negotiate with creditors because such negotiation is impracticable, as determined by the entity.
The Commonwealth or a municipality may file with the Corporation an application that the Commonwealth or municipality that the Commonwealth or municipality— meets the requirements described in subsection (a); and desires to restructure its debt. If the Commonwealth or a municipality files an application under subsection
(b)and the Board, by an affirmative vote of a majority of the members of the Board, accepts the application— the Corporation shall purchase each Bond from the holder of the Bond issued by the Commonwealth or municipality at the price paid for the Bond by the holder of the Bond; and the par value of each Bond issued by the Commonwealth or municipality shall be reduced to the last price paid for that Bond. The Corporation may examine records of sales of Bonds to determine whether the price paid by the holder of a Bond is not fraudulent. Any person that violates paragraph
(1)shall be subject to the penalties under section 10 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78j ) in the same manner and to the same extent as if the person had violated that section. Any insurer of a Bond issued by the Commonwealth or a municipality on which the Commonwealth or municipality has defaulted shall not be liable to the holder of a Bond for any amount that is greater than the purchase price of the Bond if the insurer demonstrates to the satisfaction of the Corporation that the solvency of the issuer would be affected by the restructuring of the Bond. Amounts paid by the Corporation for bonds under this subsection shall be in full and final settlement of any and all debts, claims, and liens with respect to such bonds. Except as otherwise provided in this section, the filing and acceptance of an application under subsection
(b)operates with respect to any claim, debt, or cause of action related to a Bond as a stay, applicable to all entities (as such term is defined in section 101 of title 11, United States Code), of— the commencement or continuation, including the issuance or employment of process, of a judicial, administrative, or other action or proceeding against the Commonwealth or a municipality, or to recover a claim against the Commonwealth or a municipality; the enforcement, against the Commonwealth or a municipality or against property of the Commonwealth or a municipality, of a judgment; any act to obtain possession of property of the Commonwealth or a municipality, or of property from the Commonwealth or a municipality, or to exercise control over property of the Commonwealth or a municipality; any act to create, perfect, or enforce any lien against property of the Commonwealth or a municipality; any act to create, perfect, or enforce against property of the Commonwealth or a municipality any lien to the extent that such lien secures a claim; any act to collect, assess, or recover a claim against the Commonwealth or a municipality; and the setoff of any debt owing to the Commonwealth or a municipality against any claim against the Commonwealth or a municipality. On motion of a party in interest and after notice and a hearing, the Board may grant relief from a stay under paragraph (1)— for cause, including the lack of adequate protection of a security interest in property of such party in interest; or with respect to a stay of an act against property under paragraph (1), if— the applying entity does not have an equity in such property; and such property is not necessary for the Commonwealth or municipality to provide essential services. Thirty days after a request under paragraph
(4)for relief from the stay of any act against property of the Commonwealth or a municipality under paragraph (1), such stay is terminated with respect to the party in interest making such request, unless the Board, after notice and a hearing, orders such stay continued in effect pending the conclusion of, or as a result of, a final hearing and determination under paragraph (4). A hearing under this subsection may be a preliminary hearing, or may be consolidated with the final hearing under paragraph (4). The Corporation shall order such stay continued in effect pending the conclusion of the final hearing under paragraph
(4)if there is a reasonable likelihood that the party opposing relief from such stay will prevail at the conclusion of such final hearing. If the hearing under this subsection is a preliminary hearing, then such final hearing shall be concluded not later than 30 days after the conclusion of such preliminary hearing, unless the 30-day period is extended with the consent of the parties in interest or for a specific time which the Corporation finds is required by compelling circumstances. Upon request of a party in interest, the Corporation, with or without a hearing, shall grant such relief from the stay provided under paragraph
(1)as is necessary to prevent irreparable damage to the secured interest of an entity in property, if such interest will suffer such damage before there is an opportunity for notice and a hearing under paragraph
(2)or (3). No order, judgment, or decree entered in violation of this section shall have any force or effect. In any hearing under paragraph
(2)or
(3)concerning relief from a stay— the party requesting such relief has the burden of proof on the issue of the applying entity's equity in property; and the party opposing such relief has the burden of proof on all other issues.
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Sec. 205
Default by the Commonwealth or a municipality of the Commonwealth
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