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Popular city in California files for Chapter 9 bankruptcy

An April 1, 2013 Fox News article reported that Stockton, California will be filing for bankruptcy. Stockton is the nation’s most populated city to suffer financial issues. Officials for the city filed for bankruptcy, which the U.S. Bankruptcy Court accepted this week.

The city filed the petition after facing a $26 million debt that arose from last summer’s housing bust and the city’s high pension obligations. In addition to the $26 million, the city also owes $900 million to California Public Employee’s Retirement System and nearly $1 billion in civic improvement projects.  In an effort to reduce the city’s debt, officials cut the budget for the police and other service units. However, the budget cuts were not enough to keep the city running smoothly. The city also raised taxes and cut spending significantly in an effort to avoid bankruptcy once again these efforts were not enough.

After much debate, the city officials filed for bankruptcy. In the presiding justice’s opinion, he stated that the bankruptcy was allowed because the city’s officials had a public duty to protect their citizens. The fact that the police force was greatly reduced due to financial constraints demonstrated that the city had difficulty in protecting their citizens. There are no details yet regarding how the petition will be processed.

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