By Ryan C. Wood

The answer is yes.  But how is it possible for a government entity to file for bankruptcy protection?  There is a specific chapter of the Bankruptcy Code that allows a city or county to file for bankruptcy protection just like an individual or corporation, Chapter 9. Chapter 9 is for municipalities to file for protection from their creditors.  A state, such as California, cannot file for bankruptcy protection though. The United States Constitution does not allow a state to file for bankruptcy. The Federal Government likewise cannot file for bankruptcy. A state and federal government would just default on their debts.  Contact our local bankruptcy lawyers for more information about Chapter 9 bankruptcy cases.

Oakland’s problems are all too well known in California these days.  After years of cuts in funding from the State of California, reductions in Alameda County tax assessments, generous pay and retirement packages to employees and their families combined with the overall increase in the cost of providing citizens the services we depend on Oakland found itself with a multi-million dollar budget deficit.  The State of California itself has over a ten billion dollar budget shortfall.  The budget deficit of the State of California is more than the total budget for most states in the United States.  Schedule a free consultation today with our bankruptcy attorneys and find out if bankruptcy is right for you.

Orange County filed the single largest municipal bankruptcy when it filed in 1994 and lost $1.6 billion.  The Orange County bankruptcy is notable given the scale of the financial meltdown and what led to the county having to file for bankruptcy protection.  The treasurer is an elected official and had held the position for over twenty years.  Unfortunately the treasurer was investing the pooled funds of Orange County in risky investments and generating high returns to fund their general fund.  Eventually the house of cards fell apart and the largest single municipal bankruptcy was filed.