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"In Chapter 9, however, the municipality has the absolute right to modify pensions, reject collective bargaining agreements -- without meeting any protections that would arise in Chapter 11 -- and wage and severance claims are afforded no priority," she said. "I think the bankruptcy code as a federal statute will trump the state statute. The whole rationale behind Chapter 9 and the limits on court involvement that a debtor has in Chapter 11 is to allow the sovereign the breathing room it needs to rearrange and adjust its debts, thereby allowing it to govern."
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