Local Government Bankruptcy in California: Questions and Answers
August 7, 2012
Recently, three California municipalities filed for bankruptcy relief under Chapter 9 of the federal bankruptcy code: Stockton, San Bernardino, and Mammoth Lakes. These filings—occurring just months after the City of Vallejo completed its three year Chapter 9 process—have raised questions about the use of Chapter 9 in California. In this report, we answer some of the common questions about the Chapter 9 process for California local governments such as: which local governments are allowed to file for bankruptcy protections and under what circumstances, what are the major steps of the bankruptcy process, and what types of obligations can be changed or eliminated through bankruptcy.