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Bankruptcy hits municipalities affected by bad economy, housing

So many of our neighbors in Burlington County, New Jersey can tell the same story; unmanageable expenses, the troubled economy, the crash of the housing market, and how bankruptcy was the only way out. Now local municipalities are writing the same script.

Stockton, California, has filed for bankruptcy. A Chapter 9 filing is not the same as a Chapter 7 or 13 filing that individuals file, or a Chapter 11 filing for businesses. However, many of the factors that would drive an individual or a business to file for bankruptcy are present and similar to the city’s circumstance. The Chapter 9 bankruptcy will help keep some of the creditors at bay and still allow the city to continue its basic police and fire services.

The city faces a $26 million deficit in its coffers. It has already cut $90 million from its budget, eliminated a third of its fire department, a quarter of the police department, and 40 percent of all city employees overall. The staff that remains suffered cuts to their wages and health care coverage.

More than 15 percent of the city’s population is unemployed and its violent crime rate ranks at the top of the list nationwide. Former city-owned buildings and properties hosts signs that say, “Out of Business.” City Hall has been repossessed. On top of all that, it was listed as Forbes Magazine’s most miserable city in 2010.

All of this sounds very familiar, doesn’t it? If you are thinking of filing for personal bankruptcy to eliminate the creditor harassment, annoying phone calls, wage garnishments, repossessions or foreclosures, you are in good company. There is absolutely no shame in filing to eliminate your debt under Chapter 7 or reorganize your debt through chapter 13. It could be the relief and new leaf your family needs to start over and live within your new means.

Source: BBC, “Californian city faces bankruptcy,” June 27, 2012

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