The current economic difficulties have hit not only individuals and businesses, but also municipalities. The Harrisburg City Council recently filed a bankruptcy petition for the City of Harrisburg.
The bankruptcy judge quickly dismissed the case because it was not properly authorized: the mayor opposed the filing. Since it involves a city, the Harrisburg case involves special bankruptcy provisions regarding authority.
However, the general principle — that a bankruptcy petition must be properly authorized — applies in every bankruptcy case. The question of authority is determined by state law.
The authority of a manager of a limited liability company, for example, depends on the operating agreement and on state LLC law. If, for example, the operating agreement prohibits bankruptcy or limits the manager’s authority the manager does not have the authority to file for bankruptcy. In such cases, the filing should be approved by the members through an amendment to the operating agreement.
If you are considering requesting Chapter 11 bankruptcy protection, you should consult with an attorney familiar with Chapter 11 bankruptcies to discuss your options. For a free consultation, call (480) 719-1152.