With a population of approximately 300,000, Stockton, Calif., is the largest city in the United States to seek bankruptcy protection. Since its filing last June, municipal advisers have closely monitored the city of Stockton’s Chapter 9 bankruptcy proceeding in In re City of Stockton, Calif., Case No. 2012-32118 (U.S. Bankr. E.D. Cal. 2012), because its problems, including substantial bond debt and outsized pension obligations, are far from unique.
Although there are sure to be many significant developments during this case, U.S. Bankruptcy Judge Christopher M. Klein of the Eastern District of California on April 1 resolved a key threshold question through an order that confirmed that Stockton is eligible for protection under Chapter 9. Klein entered findings of fact and conclusions of law orally on the record and a short time later issued the order, which provides some insight into the practical application of Chapter 9 and may encourage other similarly situated municipalities to move forward with their own bankruptcy filings.
