Pennsylvania's Capital Is Drowning In Debt And Likely To Threaten Bankruptcy Again

Pennsylvania's capital city Harrisburg, neck-deep in more than $340 million debt, is on the verge of getting a powerful negotiating tool with creditors: the threat of bankruptcy.

A state ban that prevented Harrisburg from filing for municipal bankruptcy protection is set to expire after November 30.

A year has passed since Harrisburg first tried filing for bankruptcy in October 2011. The city is now deeper in debt and there is no guarantee that it will not seek court protection once again.

"They're still having a problem bridging the revenues and the liabilities they have to pay," said Emanuel Grillo, chair of the financial restructuring group at the law firm Goodwin Procter.

"They haven't gotten bondholders or other constituencies to take a big enough hit," he said. "Waiving the bankruptcy option out there is really an important tool, even if [the city] never uses it."

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