California Town files Bankruptcy
September 16th, 2008, 8:30 am
In these tough times, bankruptcy protection is a tool used by not only many debtors and businesses, but now cities and towns who can meet their financial obligations. Early this summer, the town of Vallejo California filed for bankruptcy to protect its assets from creditors. It would appear that the town overextended its credit, similar to the way many small businesses do the same. The town reported it did not have the ability to pay for services it renders.
With declining tax revenues and increasing labor costs the town is squarely staring at over $16 million in debt. By filing, the town will be able to take advantage of the automatic stay put in place, in much the same way, consumers use the stay. Creditors will be unable to file suit or attempt to collect debts, while the town comes up with a plan to pay off its creditors; Home owners often file in order to stay a foreclosure.
What this filing signifies to me is that we are in a truly new era of financial difficulty, one that now affects not only consumers and business, but also the very government services we all depend upon.
