This analysis of legal collateral related to the reduction in the possibilities of incurring debt by local government bodies is aimed at proving the incompatibility of the said collateral to the current standing of public finance, as well as at identifying own proposed solutions to the problem. The current financial standing of local government bodies, combined with restrictive regulations on the limitations in incurring liabilities, may be a negative factor that effectively prevents the development of local government.

The picture of local public debt in Poland presented in the paper provides a justification of the advisability, and necessity, of implementing fundamental systemic changes, especially with regard to the issues of limitations or the thorough reform of local public debt.

The development of local government bodies will certainly depend on their financial standing. Despite advanced work on changes to the law on revenues generated by local government bodies, they cannot count on a real-term increase in revenues that would dramatically change their situation and allow for a significant extension of their investment scope.

Nevertheless, the paper is not limited to a critical review of individual solutions and contains proposed changes to the applicable legal regulatory framework. According to the author, amendment of the Law on public finance would be a major step towards successful growth of local government administration in Poland, under a general 'less limitations, more monitoring' motto. The correctness of the author's line of reasoning may be confirmed by the example of French solutions. The legislative and executive bodies did not respond to the financial difficulties of French local government bodies with increased sanctions or limitations on the accessibility of debt financing. The restructuring of insolvent local government bodies consisted primarily in the re-negotiation of terms of repayment for individual liabilities and in the state's assistance through temporary increases in the revenues generated by local government administration. Along with solving the financial problems of individual local government units, French central government authorities strengthened monitoring activities of the state of French local finances.