Jefferson County, Alabama, Votes to Declare Biggest Municipal Bankruptcy – Bloomberg
Jefferson now must show a federal judge that it can’t pay its bills and then draw up a plan for meeting obligations, which the court may reduce. Unlike corporate cases, creditors can’t try to seize or sell off county assets, and the court can’t appoint a trustee to run the county.Municipalities have more leverage with creditors under Chapter 9 of the U.S. Bankruptcy Code than corporations have when reorganizing debt in Chapter 11 protection, said Marc Levinson, a lawyer who represented Vallejo, California, when that city went bankrupt. A judge has limited authority to force a municipality to take specific actions, Levinson said.Limited Court Power“About the only thing a judge has the power to do is dismiss the case,” Levinson said.
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