On Dec. 3, a U.S. Bankruptcy Court judge ruled that the City of Detroit can file for Chapter 9 municipal bankruptcy. That makes Detroit the nation’s largest municipality to file for bankruptcy, greatly eclipsing others on the list, including three California municipalities. Orange County, Stockton and San Bernardino County came in at third, fourth and fifth, respectively, with the largest involving debt levels only a ninth the size of Detroit’s.
Despite the Great Recession being officially declared over, it’s still a tight job market. Many people remain unemployed, while others are still worried about their job security. Even some in stable jobs feel they can’t afford to take risks.
Recently, a bankruptcy filing by a Wisconsin bank holding company was held up by the New York Times’ DealBook blog as a model of prudent and, in fact, innovative management. Typically, when bank holding companies file for bankruptcy, it’s far too late to save the subsidiary banks. Holding companies generally don’t consider filing Chapter 11 until bank examiners and the Federal Deposit Insurance Corporation sweep in and take over their banks.
The Great Recession, or perhaps the federal sequester, has forced the U.S. Trustee Program to indefinitely suspend the audits it is required to perform on Chapter 7 and Chapter 13 personal bankruptcy cases. The audits are required by the 2005 bankruptcy reform law called the Bankruptcy Abuse Prevention and Consumer Protection Act, but apparently even bankruptcy trustees can't keep things going without money.