San Bernardino Officially Exits Bankruptcy

Five years ago, San Bernardino County California became the 5^th largest bankruptcy of any U.S. municipality in history due to the severe financial crisis. This month, San Bernardino is official out of bankruptcy and ready for its second chance at managing its own funds. During a Chapter 9 bankruptcy, a city, town, county, or taxing district propose a plan to reorganize and propose a plan of repayment to creditors, much like a business in Chapter 11 bankruptcies. Typically a Chief Judge of the Court of Appeals will appoint a bankruptcy judge and a creditors committee to resolve the debt issues, which is what happened in San Bernardino in 2012.

Today, however, there is a new breath of life among city planning officials, as they set about budgeting the cities $120 million dollar general fund for the coming year. While the city is a long way from being back where it was before the financial crises, the city budget will no doubt be much more conservative in the years to come, in an effort to ensure San Bernardino doesn’t go right back into bankruptcy.

Much like an individual filing bankruptcy, San Bernardino will now start paying back its creditors under the terms that were adopted in the bankruptcy payment plan. Additionally, any automatic stays on lawsuits against the city will also be able to be resumed. The city reported a total savings of close to $350 million dollars thanks to the lawsuit, however, the biggest losers of the five year long deal may be those individuals whose retirement plans were adversely affected by the arrangements that will never be returned.