Vallejo Plan Approved by Court

If you live or work in Vallejo, you may have been impacted by the financial problems facing the city of Vallejo. If you are suffering from financial problems a Chapter 7 or Chapter 13 bankruptcy may help you. On May 23, 2008, the city of Vallejo filed a case seeking bankruptcy protection and the adjustment of its debts under Chapter 9 of the United States Bankruptcy Code. Vallejo filed for bankruptcy after the recession eroded tax revenue and unions rejected wage cuts. Chapter 9 allows municipalities to reorganize debt rather than liquidate. The case was filed in the United States Bankruptcy Court for the Eastern District of California, Sacramento Division (the "Bankruptcy Court") and was assigned case number 2008-26813. The case is In re City of Vallejo, 08-26813, U.S. Bankruptcy Court, Eastern District of California (Sacramento). The City intended to continue normal business operations throughout the bankruptcy process. Vallejo, the biggest U.S. city in bankruptcy, won approval of a plan to exit court protection by cutting interest payments to its bank and reducing benefits to retirees. Bankruptcy saved Vallejo tens of millions of dollars in reduced labor costs since retirees in the case were forced to accept reduced benefits. U.S. Bankruptcy Judge Michael S. McManus in Sacramento, California, said he would sign an order approving Vallejo's plan of adjustment after the city works out final wording with attorneys for Union Bank NA, the city's primary creditor in the case. Under Vallejo's plan, Union bank would be repaid all of the $46 million in principal it is owed. The interest rates on the Union Bank loans will drop from a maximum of 7.25 percent to maximum of 2.5 percent, according to a disclosure statement that describes the city's plan. The approved plan does not alter securities tied to designated revenue sources, such as about $175 million in water revenue bonds, and other special tax obligations secured by special revenue of the city's restricted funds, according to the documents. Retirees were forced to pay more for their health benefits under the plan and the city negotiated new, lower-cost union contracts while in bankruptcy according to their attorney..Municipalities that file bankruptcy under Chapter 9 of the U.S. Bankruptcy Code have more power over their creditors than bankrupt corporations, which must use Chapter 11. If you are having finacial difficulties, a Chapter 7 or Chapter 13 bankruptcy may help you. You should consult with an attorney. We provide free legal consultations for bankruptcy in San Francisco County, Sacramento County, Alameda County, Contra Costa County, San Mateo County, Santa Clara County, Stanislaus County, San Joaquin County, Marin County, Solano County and throughout Northern California. Contact us for a free legal consultation today.

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