The county with the highest population in Alabama filed the largest municipal bankruptcy in American history. The economy went down the drain in Jefferson County -- to the tune of over $4 billion -- as a result of a corruption-marred sewer project. Unlike the common Chapter 7 bankruptcy handled regularly by King Law Center, the debts here cannot simply be flushed away.
The reason for the difference is that Chapter 9, which is what municipalities such as cities, counties, or local governments must file, is much like a Chapter 11 bankruptcy in that reorganization of the debt is required and not subject to a swift discharge as in Chapter 7.
Apparently, just two months or so after Jefferson County seemed to have brokered a deal with bankers on Wall Street, the deal feel apart over approximately $140 million. This information came from Commissioner Jimmie Stephens, who is the party who signed the bankruptcy for Alabama municipality. The actual decision to file the Chapter 11 bankruptcy -- which was not filed by King Law Center, of course -- was the result of a five person board in the County's largest city, Birmingham.
Recall that the current "record-holder" for the biggest municipal bankruptcy is Orange County, California, which ran into trouble in 1994 as a result of poorly managed pension funds. That debt was less than half of what is at issue here.Time remains, however, for the parties to get back to the negotiating table and work something out. Where governmental units are concerned, bigger issues arise than a standard consumer. Certain debts must absolutely be paid, as opposed to extinguished. Of course, the terms of repayment can be altered, and that is likely what is to happen here.
In our own state recently, Harrisburg filed for Chapter 9 bankruptcy protection, as well.
If you think you might need a bankruptcy, contact a local bankruptcy attorney. Even if you just have questions, there is no obligation or cost to chat. Call King Law Center today and speak directly to an attorney. You might be surprised to learn how the law is actually on your side and what options are available to you.
