In June of this year, Stockton, California became the largest city in the U.S. to file for bankruptcy. After failing talks with creditors, Stockton became a Chapter 9 debtor. Bob Dies, the city manager of Stockton, blamed the bankruptcy filing on the 1996 decision to give firefighters full healthcare in retirement. At the time of this decision they thought that this would be cheaper than a pay raise. In following years more people demanded the same healthcare and they obliged. Since then, Stockton has been on a spending spree. They have raised pensions, put numerous amounts of money into their downtown area, and the housing market saw a huge decline in 2009. Now, sixteen years later they are finding themselves in the middle of a Chapter 9 bankruptcy with millions of dollars owed in debts.



A Chapter 9 bankruptcy provides municipalities with protection from creditors while it is trying to work out a plan to adjust the debts. Chapter 9 is different from other types of bankruptcy because it does not allow for liquidation of assets. Under the protection of a Chapter 9 case, municipalities will be able to extend timelines to repay debts, debt refinancing, and the reduction of interest on existing loans. A Chapter 9 requires a plan to show how you will re-pay your debts. Deciding which type of bankruptcy will work best for needs can be extremely time consuming and very difficult. Having the help of an attorney can make this process seem very easy and stress free. If you have found yourself in a financial situation that you would like to get out of please contact EH Law Group now at any of our locations in San Mateo, San Francisco or San Jose.