Stockton Bankruptcy Hurts Retirees

Stockton is the largest U.S. city to ever declare bankruptcy, and it will be a hard blow for residents like city employees. As well, retirees who receive health benefits and pensions will be hurt in the filing. The City Manager says that the officials had no other choice than to file, because they weren’t able to satisfy the $26 million owed to creditors. The city will file for Chapter 9 bankruptcy protection, and many expect that they will have it locked and ready by Friday. While it may be largest, Stockton isn’t the only city to file for bankruptcy. In fact, there are plenty of other small cities that couldn’t make it through the recession without accumulating unbelievable and devastating debt.

A San Francisco bankruptcy attorney who chose to comment on Stockton’s situation says that it is just one portrait of the endemic that is taking the whole country. He says that many local governments are hurting and strained under the current pension and compensation systems, which can usurp millions of dollars from the tax profits. Some attorneys believe that the current pension and compensation costs are breaking down small governments everywhere because they are not ideal for this economy. Some city employees attended a Stockton City Council meeting recently and explained that they had life-threatening illnesses that would cost them a considerable struggle if they lost their health benefits in the bankruptcy.

One of the Stockton Board of Director members says that some people will be devastated by the situation. At the meeting, several retirees broke down in tears about the situation, and one said that bankruptcy is equivalent to a death sentence. This particular city employee has had a brain tumor for ten years, and his insurance coverage enabled him to undergo chemotherapy and other treatments that would be unaffordable. The saddening bankruptcy may be a difficult time for the city of Stockton, but hopefully it will be a helpful time for the city to refresh their financial situation and get back on track.