Reuters ran a story recently about Central Falls, a Rhode Island city that filed for Chapter 9 bankruptcy last year.
Last week, the city was expected to win the approval of a restructuring plan that was expected to balance its budget in the next five years. The restructuring plan is a giant step in the rebuilding process for the city, which had been desperate to figure out ways to cope with its debt.
Central Falls is the smallest city in Rhode Island, according to Reuters, and the only one to ever file for bankruptcy. According to the news service, “Central Falls is a city of about 19,400 people, 60 percent of them Latino, crammed into 1.2 square miles.”
Reuters pointed out that the city had to file for bankruptcy because of rising city employee pension costs and property value decreases that lowered tax collections. According to the story, Central Falls had about $80 million in unfunded pension benefits at the time of its bankruptcy filing, or about five times its annual budget.
Without bankruptcy, Central Falls would have had terrible issues trying to balance its budget. During a Chapter 9 bankruptcy, creditors cannot demand a liquidation process to repay debts, so the bankruptcy has helped Central Falls in the short term. Through the bankruptcy process, the city will be able to re-write its collective bargaining agreements with employees and repackage pension plans.
While Chapter 9 bankruptcy is for only municipalities, an individual who has unsecured debt may choose other forms of bankruptcy for relief. Chapter 7 bankruptcy allows you to discharge unsecured debt, like credit card debt or medical bills. Also, a Chapter 13 bankruptcy, much like in Chapter 9 bankruptcy, allows people to keep control of their possessions while working on a repayment plan and restructuring debt.
If you have large amounts of debt, bankruptcy is an option. Visit our website for more information about the benefits of bankruptcy, or call us at (202) 483-6070 to schedule an appointment.
Law Firm of Kevin D. Judd– Washington DC and Maryland bankruptcy attorney