{"data":{"id":"us-ky/krs-66.400","jurisdiction":"us-ky","citation":"KRS 66.400","heading":"Municipalities may go into bankruptcy -- Approval of state local debt","body":"officer and state local finance officer required for county -- Municipality may\nnot file if delinquent in contributions to retirement system -- Liens on bonds or\nleases -- Public property exempt from seizure -- Judgments against local\ngovernment -- Exceptions.  (Effective April 1, 2021)\n(1) As used in this section:\n(a) \"Bond\" has the same meaning as in KRS 66.011 and is issued according to the\nprovisions of KRS 66.011 to 66.191;\n(b) \"Lease\" has the same meaning as in KRS 65.940 and is entered into under the\nprovisions of KRS 65.940 to 65.956; and\n(c) \"Local government\" has the same meaning as in KRS 44.001.\n(2) (a) Except as otherwise provided by this section, any municipality as defined in\nthe United States Bankruptcy Code, 11 U.S.C. secs. 101 et seq., and acts\namendatory and supplementary thereto or acts extending the date of expiration\nthereof, as the same may be amended or extended from time to time, may file\na petition for the  composition of its debts and to do all things necessary to\ncomply with the provisions of the United States Bankruptcy Code.\n(b) No county shall file a petition as provided in the United States Bankruptcy\nCode unless the proposed plan is first approved by the state local debt officer\nand the state local finance officer, as defined in KRS 68.001. No changes or\nmodifications shall be made in the plan of composition after the filing of the\npetition without the approval of the state local debt officer and the s tate local\nfinance officer. The state local debt officer and the state local finance officer\nshall approve or disapprove the proposed plan of composition or any changes\nor modifications thereof under the same procedure and for the same reasons as\nbonds are approved or disapproved under KRS 66.280 to 66.390.\n(c) No municipality may file for bankruptcy protection under the United States\nBankruptcy Code if it is in default or is delinquent in the payment of\ncontributions due under KRS 78.510 to 78.852.\n(3) (a) The revenues of a tax adopted:\n1. According to KRS 66.111(1) for the payment of bonds shall be deemed\npledged for the payment of the principal of and the premium and interest\non the bonds; and\n2. According to KRS 65.942(2) for the payment of a lease shall  be deemed\npledged for the payment of the principal and interest portions of a lease\npayment and any prepayment penalties on a lease;\nwhether or not the pledge is stated in the bonds, the lease, or in the\nproceedings authorizing the bonds or the lease.\n(b) The holders of all bonds issued and leases entered into shall have a first lien\non those tax revenues.\n(c) There shall be a statutory lien on the tax revenues pledged in favor of the\nholders of all bonds issued and leases entered into, effective by ope ration of\nlaw, that shall apply to all outstanding bonds payable from taxes adopted\naccording to KRS 66.111(1) and leases payable from taxes adopted according\nto KRS 65.942(2), without priority of one (1) bond or lease over another bond\nor lease, regardles s of when the bonds were issued or the lease was entered\ninto.\n(d) No filing need be made under the Uniform Commercial Code or otherwise to\nperfect the lien on the tax revenues.\n(e) The pledge of the tax shall constitute a sufficient appropriation, and the  tax\nrevenues shall be applied as required by the pledge, without the requirement\nfor further appropriation.\n(4) Amounts appropriated for the payment of any obligation that is subject to annual\nrenewal, including but not limited to leases entered into unde r the provisions of\nKRS 58.010 to 58.205 or KRS 65.940 to 65.956, shall be deemed pledged for\npayment according to subsection (3)(a) of this section, and the holders of all bonds\nissued or leases entered into shall have a first lien on those appropriations\ncommencing on the date of the appropriation.\n(5) (a) The public property of any local government, of every character and\ndescription, used for government or public purposes, is exempt from seizure\nby attachment, execution, or other legal process, except a s provided in\nsubsections (7) and (8) of this section.\n(b) A local government's funds in the hands of its treasurer or a depository shall\nnot be subject to garnishment or other legal process, except as provided in\nsubsections (6), (7), and (8) of this section.\n(6) (a) Except for judgments covered under KRS 65.2004, any local government\nagainst which final judgment has been rendered for a claim that is not fully\ncovered by insurance may make a motion to the Circuit Court to enter an order\nfor the payment of money damages, in whole or in part, through a periodic\npayment schedule for a period of time not to exceed ten (10) years.\n(b) A court entering an order in response to a motion made by a local government\nunder paragraph (a) of this subsection shall conside r the ability of the local\ngovernment to pay the judgment without a substantial disruption to the\nessential public services provided by the local government. The court shall\nconsider the following factors in evaluating the motion and in setting a\nperiodic payment schedule:\n1. The funds available in the local government's current fiscal year and\nother funds available to the local government to pay the damages in the\nremainder of the local government's fiscal year during which the final\njudgment was entered;\n2. The total revenues reasonably expected to be collected by the local\ngovernment in subsequent fiscal years based upon the historical\ncollections in previous fiscal years;\n3. The total expenses of the local government in subsequent years for the\ncosts ass ociated with the provision of essential public services, the\npayment of debt service for the existing obligations of the local\ngovernment, and any other expenses reasonably necessary for the\nefficient administration of the local government, including perso nnel,\noperation, and maintenance costs associated with existing infrastructure,\nand new costs which may be reasonably anticipated for the local\ngovernment; and\n4. If the award for damages is an amount that exceeds twenty -five percent\n(25%) of the total rev enues collected by the local government in the\nimmediately preceding fiscal year, the court may also consider any\nrevenue or debt financing options that are reasonably available to the\nlocal government that could be employed to help satisfy the judgment.\n(c) An order entered by the court establishing a periodic payment schedule shall\nspecify the total amount awarded, the amount of each payment, the interval\nbetween payments, and the number of payments to be paid under the order.\n(d) Any judgment paid pursua nt to the periodic payment schedule established\nunder this subsection shall bear interest accruing from the date final judgment\nis entered at one-half (1/2) the interest rate provided by KRS 360.040.\n(e) Upon petition to the court, the court may modify a p eriodic payment schedule\nestablished in this subsection for good cause shown by the local government.\nThe modification may include changes to the amount of payments, the number\nof payments, and the period of payments, but in no case shall an adjustment\npursuant to this paragraph alter the total amount of damages to be paid,\nexclusive of interest, in the original order.\n(7) Subject to the provisions of subsection (6) of this section, a court may enter an order\nproviding for the attachment, execution, garnish ment, or seizure by other legal\nprocess of public property, including moneys, of a local government only upon a\nfinding that:\n(a) The local government has failed to comply with an order, modified order, or\njudgment entered by the court as provided by subse ction (6) of this section or\nKRS 65.2004;\n(b) After a period of twenty -four (24) months, the local government did not\npetition the court to enter an order for the payment of money damages, in\nwhole or in part, through a periodic payment schedule as provide d by\nsubsection (6) of this section or KRS 65.2004 and has not paid in full the total\ndamages awarded under the judgment; or\n(c) The judgment for damages was not of the type that permitted the court to enter\nan award of periodic damages, and the local gove rnment has failed to pay the\ndamages due in full after the passage of twenty -four (24) months from the\nentry of a final judgment.\n(8) (a) Any order providing for the attachment, execution, garnishment, or seizure by\nother legal process of public property, including moneys, of a local\ngovernment shall not impair the ability of the local government to continue to\nprovide essential services to the public, including the payment of key\npersonnel needed for the provision of those services and those employees\nnecessary for the collection of revenues on behalf of the local government.\n(b) In making a determination as to the appropriate extent of an order under this\nsubsection, a court shall consider but shall not be limited to the factors\nprovided in subsection (6)(b) of this section.\n(9) Nothing in this section shall:\n(a) Bar the pursuit of any other remedies that exist to enforce a judgment under\nstate law; or\n(b) Prohibit a local government and a judgment creditor from entering into an\nagreement for the payment of  damages under terms and conditions that differ\nfrom the remedies and process established under this section.","path":["KRS Chapter 66"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=50546","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:49:24Z","sha256":"2682494fcf1b31ef2cee7e78bce0fe10602bcf38af1dfb87e00f9858d69d6a6a","source_id":"us-ky","stale":false,"prev":"us-ky/krs-66.390","next":"us-ky/krs-66.410"},"notice":"GroundRules: Original legal text. Not legal advice."}