Just like the organization, companies and individual can declare themselves bankrupt, so does a municipality can. The basic difference lies in the chapter, which will be filed to handle the proceedings. Chapter 9 bankruptcy provides protection to the municipality and its creditors by fabricating a plan which solves their debt issues. The municipality inculcates cities, townships, school and districts.
A very simple explanation to protection being pursued will be able to be availed by the Stockton Bankruptcy case. The open letter of the community has been a valuable source of this article.
It was on June 28, 2012 that the city of Stockton filed a petition for protection under the Chapter 9 of the bankruptcy act. And, after almost 3 years of the law proceedings, on February 25, 2015 the city has been granted the bankruptcy exit plan as accepted. This is being witnessed as a new birth of the city.
There was the time, when the community was under $2 billion debt. The debt was faced due to the labor agreements, financial obligations and other long term debts. As it happens with Chapter 9 bankruptcy cases, there is no wipe out of debts. In fact, the solution is initiated taking into consideration all the society members. A plethora of steps has been planned which include revised labor agreements with employees, elimination of free retiree health care and pursuing reasonable agreements with the largest creditors. The result is preserving the city’s future as a sustainable city.