San Francisco Bankruptcy Attorney Blog

A San Francisco bankruptcy attorney speaks to Local Governments and Chapter 9

The Bankruptcy Code provides relief for municipalities and local governments in addition to individuals and businesses. Municipality reorganization is found in chapter 9 of the bankruptcy code and is only available to local governments, municipalities, public agencies, and political subdivisions.

Local governments and chapter 9 filings are much less common that individual and business filings, however chapter 9 filings are not unheard of. Chapter 9 reorganization differs from individual filings in the sense that the local governments have much more control over the reorganization plan, thanks in part to the 10th Amendment of the U.S. Constitution – which protects states rights from federal government interference.

One of the biggest differences between chapter 9 bankruptcies and other chapters of the bankruptcy code is the fact that there can be no involuntary proceeding brought under chapter 9. Another big difference is the ability of the political entity to raise taxes and implement other revenue generating programs without court approval. Municipalities can also invoke broad power when dealing with public employees operating under a collective bargaining agreement.
The bankruptcy court does possess some power, however, and can dismiss petitions that were not filed in good faith or petitions which appear to be abusive or filed simply to take advantage of the bankruptcy powers. The most well known recent example of a chapter 9 bankruptcy filing was in 2009 when the City of Vallejo, CA filed in order to alleviate budget problems and reorganize its finances.

If you have questions regarding bankruptcy in San Francisco or bankruptcy in the greater Bay Area please contact our San Francisco Bankruptcy Attorneys at (415) 946-8882 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Francisco Bankruptcy Attorneys. After you have spoken with one of our Bay Area bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of Bankruptcy Lawyers, Bankruptcy Customer Care Specialists and Bankuptcy staff supporting San Francisco and Bay Area consumers in debt can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Francisco Bay Area!

A San Francisco Bankruptcy Attorney discusses how filing bankruptcy will create debt relief...

What types of bankruptcy are offered to individuals?
For individuals seeking debt relief, the bankruptcy code provides for several different methods for filing, depending on the individual’s financial situation. The most common types of cases filed are those in chapter 7 (liquidation) and chapter 13 (repayment). Chapter 11 is primarily used for business reorganization or individuals who do not meet Chapter 7 or 13 requirements, and chapter 12 is only available to farmers and fisherman.

What does bankruptcy do?
Generally, individuals seeking debt relief will file for bankruptcy, with the ultimate goal being either to have most debts discharged or to structure a repayment plan to pay back a certain amount of the debt and have the rest discharged at the end of the plan. Chapter 7 debt relief is in the form of liquidating all non-exempt assets and using the proceeds to pay back creditors. In chapter 13, the individual must have a constant source of income in order to set up a repayment plan. Often those repayment plans are for only a certain percentage of the actual amount owed to creditors.

What does a discharge provide?
Part of the debt relief goal in bankruptcy is to have as many possible debts discharged. Discharge means that the debtor is no longer personally liable for the debts and those creditors cannot take any action against the debtor in order to seek repayment. This is important for an individual wanting debt relief because once the debts are discharged, the debtor can move forward and not have to worry about making more payments.

Is it possible to discharge taxes?
Yes, although there are certain qualifications that must be met prior to having taxes discharged in bankruptcy. The general rule in a chapter 7 case is that taxes are only able to be discharged if they are over three years old or if it has been three years since the debtor’s last tax audit or assessment. For example, if a debtor owed taxes for the years 2005, 2006, and 2009, only those debts from 2005 and 2006 would be subject to discharge. In chapter 13 cases, however, taxes are considered a priority claim and are repaid first during the repayment plan.

What does bankruptcy do for debt relief?
It is important for individuals to realize that once the bankruptcy proceeding is over and the debtor obtains a discharge, the debtor is no longer liable for those debts. This allows the debtor to move forward in life and begin rebuilding credit and taking active steps to manage finances. The debt relief alleviates stress and other problems associated with pre-bankruptcy worries. Whether the individual files under either chapter 7 or chapter 13, once the discharge is entered there is no longer a need to be concerned about the obligation to repay the debt.

If you have questions regarding bankruptcy in San Francisco or bankruptcy in the greater Bay Area please contact our San Francisco Bankruptcy Attorneys at (415) 946-8882 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Francisco Bankruptcy Attorneys. After you have spoken with one of our Bay Area bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of Bankruptcy Lawyers, Bankruptcy Customer Care Specialists and Bankuptcy staff supporting San Francisco and Bay Area consumers in debt can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Francisco Bay Area!

A San Francisco bankruptcy attorney answers the question Who Files for Chapter 9 Bankruptcy?

Who files chapter 9 bankruptcy?

Chapter 9 of the Bankruptcy Code is reserved only for municipalities that want to file bankruptcy.

How is a municipality defined?
Municipalities that file chapter 9 must meet the definition in the bankruptcy code. The bankruptcy code defines municipalities as a “political subdivision or public agency or instrumentality of a state.” 11 USC 104(b). The definition is broad enough to allow cities, townships, and public improvement districts to file chapter 9 bankruptcy.

What happens when a municipality files chapter 9 bankruptcy?
Similar to other chapters, a municipality that will file chapter 9 must provide a list of creditors and provide notice to them. In addition, municipalities that file chapter 9 receive an automatic stay from collection.

Is a trustee appointed when a municipality files chapter 9?
Yes, although unlike other bankruptcy chapters, when a municipality files chapter 9 no examination of the municipality is conducted. In addition, the trustee does not monitor the financial operations of the municipality when it files chapter 9 and does not review the fees for professionals assisting with the case. This is primarily due to the 10th Amendments states rights provision.

What powers does a municipality that files chapter 9 have?
When a municipality files chapter 9 there are special bankruptcy statues that provide it with broad powers to run its financial affairs. These powers include raising taxes, rejecting collective bargaining agreements, and rejecting retirement benefit plans.

Is a debt management plan created when a municipality files chapter 9?

Yes, the bankruptcy code allows municipalities, when it files chapter 9, to develop a debt management plan. The plan either extends maturities, reduces the amount of principal or interest, or allows the municipality to refinance. There is no liquidation provision because of interference with the 10th Amendment states rights clause.
How does a municipality exit bankruptcy after it files chapter 9?

The municipality, in order to be discharged, must present a plan and deposit what is to be repaid under the plan with a disbursing agent, who is appointed by the court. Then the court must be satisfied the disbursements will be carried out.

If you have questions regarding bankruptcy in San Francisco or bankruptcy in the greater Bay Area please contact our San Francisco Bankruptcy Attorneys at (415) 946-8882 for a free consultation or visit www.bkanswers.com and we can connect you with one of our experienced San Francisco Bankruptcy Attorneys. After you have spoken with one of our Bay Area bankruptcy attorneys, we can schedule you for a free face to face appointment in an office location nearest you. Our team of Bankruptcy Lawyers, Bankruptcy Customer Care Specialists and Bankuptcy staff supporting San Francisco and Bay Area consumers in debt can assist you with all aspects of your bankruptcy or bankruptcy litigation case. If you have questions about filing a Chapter 7 bankruptcy, a Chapter 11 bankruptcy, a Chapter 13 bankruptcy, or would like to learn more about bankruptcy litigation, legal debt settlement, mortgage modification, lien stripping, cram down, stopping a foreclosure, wage garnishment, asset protection, discharging a debt, etc. we can help! We have bankruptcy attorneys located throughout California and Oregon who can assist you with all of your debt resolution questions. Please feel free to complete our free online bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy. We look forward to hearing from you, San Francisco Bay Area!