Start Fresh Today Bankruptcy Blog

California Municipalities File For Bankruptcy: Cities Join Consumers in Seeking Bankruptcy Protection

Posted on 8/6/12 4:03 PM

According to a study performed by Columbia Law School for the National Bankruptcy Research Center, the number of bankruptcy filings in the U.S. decreased by about 12% last year. However, it’s a different situation for the state of California. It still had the 5th highest bankruptcy rate in the nation last year, with 1 in every 120 Californians filing for bankruptcy. California consumers weren’t the only ones needing bankruptcy protection. Recently, several high-profile Southern California bankruptcies involving cities took place. The first was the city of Stockton bankruptcy, followed by Mammoth Lakes and San Bernardino. These cities sought protection under Chapter 9.

The purpose of a Chapter 9 bankruptcy is to protect financially-distressed municipalities (such as cities, counties, and school districts) from their creditors while they develop and negotiate plans for adjusting their debts. The big difference from other chapters of bankruptcy is that there is no legal provision for liquidating municipalities’ assets and distributing the proceeds to creditors. The reason: liquidations would violate the Tenth Amendment of the Constitution and the states’ sovereignty regarding their internal affairs.

Offering California Bankruptcy Courses

While a municipality can only file under Chapter 9, a consumer needs to determine whether to file for Chapter 7 or Chapter 13 protection. In a Chapter 7 bankruptcy, a debtor’s nonexempt assets are liquidated to satisfy creditors’ claims. For Chapter 13, a debtor needs to arrange a plan to make regular payments to pay off some of the debts. While paying under the plan, the debtor is protected from creditors’ actions such as garnishments and lawsuits. Once the plan is completed, any remaining debts are discharged.

Are you one of the many Californians considering bankruptcy protection but not sure where to begin or what California bankruptcy forms need to be filed? If you do not have an attorney, use Start Fresh Today’s free Attorney Locator to find qualified bankruptcy attorneys across California, including Los Angeles bankruptcy attorneys as well as Orange County bankruptcy attorneys.  Start Fresh Today also offers affordable and approved bankruptcy courses, including pre-bankruptcy credit counseling and debtor education courses.

Helping Attorneys with their Bankruptcy Due Diligence

If you are a California attorney with many clients seeking consumer bankruptcy protection, Start Fresh Today provides you with an all-in-one proprietary platform that includes bankruptcy software integration and due diligence products. For your clients, we offer the required bankruptcy counseling and debtor education courses online or by phone, in English and Spanish, and we provide immediate certificate delivery. Visit our bankruptcy attorney resource page for find out more about the court rules and forms applicable to your clients’ Chapter 7 or Chapter 13 bankruptcy in California.

Tags: California bankruptcy

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