Municipal Bankruptcies

Cities Filing For Bankruptcy Protection

Posted on behalf of Phoenix bankruptcy Attorneys Wright & Gallagher, PLC on July 25, 2012

San Bernardino, California this week became the third California city to file for bankruptcy protection in the last month.  It is quite possible that it won’t be the last California City to declare bankruptcy.  This comes on the heels of the tiny resort town of Mammoth Lakes filing for bankruptcy protection on July 2nd.  Mammoth Lakes filed bankruptcy papers in part because it was saddled with a $43-million court judgment it couldn’t pay.

“There are likely to be more in the future, but it’s hard to know, since a lot of struggling cities may manage to work things out,” said Michael Coleman, a fiscal policy adviser for the California League of Cities. “Some cities may not go into a bankruptcy, but they may dissolve. They may cease to exist.”

With the bankruptcy filing of San Bernardino, it became the second-largest city ever to file for protection under Chapter 9 of the U.S. Bankruptcy code.  The largest city to ever file for bankruptcy in the U.S. was Stockton, California which filed for Chapter 9 bankruptcy protection earlier this year. (2012)

What does this mean when a city or municipality files for bankruptcy?  Filing for municipal bankruptcy protection will allow San Bernardino to renegotiate contracts, including those with employees, and stave off creditors while officials restructure the city’s finances. Current employee pension obligations, one of the contributors to the city’s financial straits, will not be affected, officials said.

San Bernardino’s tax revenues have declined by as much as $16 million annually over the last few years, primarily because of drops in sales and property taxes.

So, if you are feeling overwhelmed or alone in your fight against creditors and the current poor economy, know that you have company as not only are several people in Phoenix, Maricopa County, and Arizona seeking protection through filing bankruptcy but cities and municipalities are also seeking debt relief assistance.

Contact an experienced Phoenix Bankruptcy Lawyer today and find out if filing for bankruptcy is the best type of debt relief for you and your family.  Our consultations are FREE and our legal rates are some of the lowest in all of Phoenix and throughout Arizona.

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