Tuesday, March 27, 2012

Flint Michigan should discuss filing for Chapter 9 Bankruptcy


News reports show We could  be witnessing soon the largest Chapter 9 bankruptcy filings in the history of the U.S.?  Several on MLIVE have speculated that the City of Flint should declare bankruptcy. The City  of Flint has been struggling throughout the Great Recession and now faces high unemployment and rising crime rates. The City of Flint  has also been listed as one of the nation's most violent cities and currently is under the control of an Emergency Manager appointed by Michigan Governor

The demise of the auto related jobs, high foreclosure problems  contributed to a municipal decline. The banks collapsed and home prices plummeted.With the empty houses, the city officials are collecting less property taxes. These are not  the only contributing factor to the demise of Flints  economy. It doesn't look like Flint  is headed for Chapter 9 bankruptcy anytime soon, but it may be time for local officials to heed the warning  that Flint current Emergency Manager may not be able to solve Flints financial demise. A public discussion of Chapter 9 Bankruptcy should begin in Flint.

Is municipal bankruptcy all bad? How can things get worse?

These Chapter 9 Bankruptcies are being seriously considered in other parts of the country, why not here?

MARCH 5 2012 -Recently a federal judge ruled Alabama ‘s Jefferson County can go ahead with its $4.23 billion bankruptcy case, the biggest ever by an American municipality. The recent late Sunday ruling by U.S. Bankruptcy Judge Thomas Bennett opens the road for the county to restructure more than $3 billion in debt incurred as a result of an expensive sewer-system overhaul, as well as other liabilities. Sound familiar. Flint Mayors and City Councils have allowed the looting of our water and sewer fund.

MARCH 5 2012-Cases brought by other U.S. municipalities, such as Harrisburg, Pennsylvania, have been thrown out by other federal judges in recent months. The city of Stockton, California, last week decided to default on its debt in an effort to avoid becoming the most populous U.S. city to file for bankruptcy

What is a Chapter 9 Bankruptcy. It is properly titled “adjustment of debts” of a municipality and is commonly referred to as a “municipal reorganization”. It is similar to a Chapter 11 Business reorganization.

A Chapter 9 will allow Flint to reorganize its debt under the protection of a Federal Court.  Flint can start the process by filing a petition and a plan for reorganization with the court.  The plan proposed a repayment of the municipal debt broken down by class of creditor over a period of time.

The Chapter 9 City gets a discharge of debt when the plan is confirmed. The Court Maintains jurisdiction to make sure the plan is complied with.

Citizens should seriously consider and debate these options then apply pressure for action where we can.

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