Stockton, Calif., Files for Bankruptcy

STOCKTON MURDER
Bloomberg via Getty Images

Stockton, Calif., became the largest U.S. city to take the extraordinary step of filing for bankruptcy. The city reluctantly filed Thursday, after a history of fiscal mismanagement compounded by a housing bust left the city swamped in debts. The city council had voted 6-1 Tuesday to seek rare federal Chapter 9 protection for the city of 290,000 in California's Central Valley. "We exhausted every other option," Stockton's mayor said, noting that the city is insolvent and faces a $26 million budget deficit. Retired public workers worried about benefits protested the move, and residents worried crime might rise. Stockton was a big beneficiary of the housing boom and a major casualty of its collapse. It had been in talks with creditors for months recently in an effort to avoid bankruptcy. The city could help set a precedent for how large municipal bankruptcies and reorganizations are treated — and in what instances federal bankruptcy courts allow them.

Read More

Contact Us