The judge agreed and, in doing so, expanded what types of debt could be reduced in bankruptcy. This was, and remains, controversial.
The city emerged out of bankruptcy solvent but struggling. But no creditor would walk away unscathed. Wages, pensions and health care for city employees were all cut. The bigger the city, the more complicated and expensive the bankruptcy.
It also makes the process of picking winners and losers more complex and something that can involve testing the limits of bankruptcy law. When these limits expand, just what going bust means can change dramatically. Things that once seemed untouchable, like pensions, can become vulnerable in bankruptcy courts.
With many budgets in tatters, the prospect of growing numbers of city bankruptcies looms. Distressed cities will have to figure out what the process means for them.
It is rarely possible to predict what any city will decide. There is no single, predictable path through city bankruptcy. This article is republished from The Conversation under a Creative Commons license. After Truck America heavily invested in its plans for the school, Hillview tried to back out when another potential buyer emerged.
That lawsuit, along with other creditors, pushed Hillview to file for Chapter 9 bankruptcy protection on Aug. Detroit filed for Chapter 9 bankruptcy protection on July 18, , becoming the record-holder as the largest city to file. On a broad level, Detroit suffered from a general decline of the city — its population has dropped 28 percent since Bankruptcies in the auto industry also hit the city, with General Motors and Chrysler both filing for Chapter 11 bankruptcy protection in Although still struggling, Detroit has made significant efforts toward recovery.
Despite its troubles, Detroit appears to be heading in the right direction. Although Michigan is overall rated poorly among the best and worst states to start a business, Detroit shows good conditions for potential startups.
The capital of Pennsylvania, Harrisburg got itself into financial trouble over a trash incinerator — technically, a trash-to-energy facility. The City of Harrisburg filed a Chapter 9 voluntary petition for bankruptcy Oct. Bankruptcy Court.
Like many cities on this list, Central Falls faced serious financial headwinds due to the Great Recession. Central Falls filed for Chapter 9 bankruptcy on Aug. Central Falls got its bankruptcy plan approved in court and emerged from Chapter 9 bankruptcy, although it continued to struggle in its recovery. Recently, Central Falls closed a financial deal with the state. That was the same amount of money Central Falls was court-ordered to pay the state in order to get its bankruptcy plan approved in the first place.
Prichard, Ala. The city had been warned for years to do something to fix its pension fund, which was in trouble and would run out of money by When the fund ran out right on schedule, the city stopped sending pension checks to people, which meant it also broke a state law requiring it to pay all promised retirement benefits.
Its pension plan was established in as a supplement to Social Security, and everything was working until workers started retiring in their 50s, which the plan allowed. After the city declared bankruptcy in , it reduced pension benefits by 8.
The city sought Chapter 9 bankruptcy protection in January , but the reasons for the bankruptcy filing are more complicated. When he died, Moffett discovered the debt. In December , the state Department of Public Safety declared Moffett as a speed-trap town and ordered police to stop issuing tickets on U.
Route Hartford is the latest American city to be on the verge of bankruptcy, according to the Hartford Courant. Connecticut capital officials have been asking law firms that specialize in Chapter 9 bankruptcy to submit proposals, and the city anticipates coming up short in its budget.
In addition, it has some of the highest property tax rates in the state, which rules out raising them to cover the budget gap.
Langford was found guilty of conducting corrupt business deals that added to the multibillion-dollar sewer debt. He was sentenced to 15 years in prison. I recommend Warren and Migliaccio to anyone who like myself, had no idea of what to do next.
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Like Vallejo, a naval base closure cost the city some 10, jobs and sparked an economic downturn. By the City had cut nearly half of its full-time employees from 1, to approximately Other changes included contracting out services for a soccer complex, street sweeping and solid waste collection. Well-known in pop culture as the setting for television shows such as The O. In fact, the county's debt was generated by a series of risky investments made by county treasurer Robert Citron based on advice from investment management firm, Merrill Lynch, which encouraged the inexperienced investor to follow a high-risk strategy.
In November auditors told county officials that Citron had lost the county a serious amount of money. This led to his resignation and the county sued Merrill Lynch. But the events had much wider ramifications, and the county was forced to lay off workers, freeze new hires and make severe cuts to the budget. In July Orange County made its last bond payment related to the bankruptcy.
Read about the bankrupt billionaires who lost it all. The first issue was that of the large sums of money the county borrowed to rebuild the sewers much of it was spent on bribes. And so short on cash and still without new sewers, the county pursued a bond deal with interest-rate swaps, a type of financial product that proved costly for Jefferson County during the financial crisis in
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