Question

Which of the following is true with respect to bankruptcy? a. Per the federal bankruptcy code, a municipality can be declared bankrupt but not insolvent. b. Many major cities have avoided bankruptcy by being placed under the control of financial control boards by their state governments. c. The concept of bankruptcy does not apply to governments because they have the authority to increase taxes and reduce services. d. Municipalities that are declared bankrupt by a court are brought under the control of independent trustees whose primary objective is to ensure that obligations to bondholders are satisfied in full.

Answer 1

Answer:

Options B & D

Explanation:

Bankruptcy refers to a situation where by a people cannot pay their debts. It involves a legal process.

Option B and D are true.

Many major cities have avoided bankruptcy by being placed under the control of financial control boards by their state governments. As such it they are declared bankrupt by a court are brought under the control of independent trustees whose primary objective is to ensure that obligations to bondholders are satisfied in full.

- A: Per the federal bankruptcy code, a municipality can be declared bankrupt but not insolvent is not true because if you are declared bankrupt, it implies that you are either not paying you loan as due or have stopped paying for a while and it also means you are insolvent. A government can be bankrupt if they cannot pay their debts.