Government Law

Judge OKs record municipal bankruptcy, says city can't otherwise provide services

In what is being billed as the biggest municipal bust ever, the city of Stockton, Calif., has been given a green light, over the objection of creditors, to go ahead with a bankruptcy case after a required 90-day mediation period.

U.S. Bankruptcy Judge Christopher Klein ruled Monday that creditors did not negotiate in good faith, and said the city would be unable to provide necessary services if the Chapter 9 case is not allowed to proceed, according to Fox News, the the Los Angeles Times’ L.A. Now blog and Reuters.

Big issues in the case are likely to revolve around the city’s pension shortfall and obligations to bondholders, NPR notes.

See also:

ABA Journal: “The Next Chapter: Municipalities Are Using Chapter 9 to Fend Off Creditors”

We welcome your comments, but please adhere to our comment policy and the ABA Code of Conduct.

Commenting is not available in this channel entry.