Many cities across the country are facing a fiscal crisis, but in California yet another municipal bankruptcy looms. This time it’s Compton, once known as the 4th most dangerous city in America.
California seems to be collapsing within, three cities; Mammoth Lakes, Stockton, and San Bernardino have already declared bankruptcy. And there are a variety of reasons these cities are facing insolvency, such as declining property tax revenue due to the large number of foreclosures, unsustainable public employee benefits and mishandling of city funds.
Compton faces those same problems, but has the added issue of very high unemployment which stands at 18.8 percent.
Compton’s city treasurer Doug Sanders said, “I have $3 million in the bank and $5 million in in warrants due in the next 10 to 12 days. By then, the council will have a decision to make: don’t pay the bonds, default on them, or have a serious talk about bankruptcy.”
The city is the red by $43 million and has already gone through $22 million in reserves. If they don’t take action soon they will run out of money to pay city employees by September 1st, so Chapter 9 may be in the city’s future.
The downward spiral into insolvency isn’t reserved to cities, in the wake of high unemployment and decreased consumer demand many businesses and individuals are turning to bankruptcy attorneys to help the solve their debt problems.
Though bankruptcy may not be the most desirable option, it will give business owners and people the opportunity to stop collection activities. Depending on the plan recommended by a bankruptcy lawyer, a debtor can reduce and even eliminate their debts.
Chapter 7, Chapter 13 and Chapter 11 vary but they all have the end goal of getting debt protection for the filer. When unsure, a bankruptcy attorney can clarify the requirements and benefits of each filing and get their clients back on sound financial footing.