The City of Stockton, Calif. filed for Chapter 9 bankruptcy this month, making it the largest U.S. city to ever file a petition.
Stockton, with a population of around 900,000, reportedly owes more than $700 million in debt to creditors, according to the Wall Street Journal. The next largest city to file for a bankruptcy was Bridgeport, Conn., which has a population of 141,000 residents. According to the paper, Stockton has, “spiraled into a morass of debt because of high retiree costs and big spending on a downtown revitalization effort.”
Stockton hopes the Chapter 9 bankruptcy filing will allow it to restructure its debt and come up with a payment plan. During a Chapter 9 bankruptcy, creditors cannot demand a liquidation process to repay debts, so this also helps in the short term. Through a successful filing, the city will be able to re-write its collective barging agreements with employees and repackage pension plans. According to the paper, Stockton has “slashed more than $90 million from its budget since 2009—including reducing its police department by 25 percent, cutting its fire department by 30 percent and slashing pay by as much as 22 percent for some workers.”
The city’s struggle with paying its creditors shows how bankruptcy can happen at any time, including to municipalities who operate with multi-million dollar budgets. While Chapter 9 bankruptcy is strictly for municipalities, an individual who has unsecured debt may be facing the same difficult financial decisions and other forms of bankruptcy may be an excellent option for relief.
Chapter 7 bankruptcy allows you to discharge unsecured debt, like credit card debt or medical bills, which often go unpaid when financial issues arise. 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 your financial situation is a problem, contact our Washington DC and Maryland bankruptcy attorney now for a free consultation.
Law Firm of Kevin D. Judd– Washington DC and Maryland bankruptcy attorney