Jim Spiotto

“Only 62 cities, towns, villages and counties have filed Chapter 9 since 1954. And they’ve been small ones, except for Bridgeport, Connecticut, in 1991, Orange County in 1994, Vallejo in 2008, Harrisburg last year but they got dismissed, Boise last year and then Jefferson County. Then Stockton and San Bernardino this year. They don’t want to give up the right to fund infrastructure locally and borrow money locally at a low cost. And if you file Chapter 9, access is either going to be limited or you’re not going to have it. That’s why I’m not surprised there have only been three. They’re for the most part only small municipalities. Big cities have to work with the state to try to find a solution. If they go into bankruptcy, the stigma of that could be fatal to them.” ~ Jim Spiotto, Chapman & Cutler

Spiotto II: What’s the most common misconception people have about Chapter 9 bankruptcy? A: “People don’t realize until they get in it how complicated, time-consuming, and uncertain it is, and it costs money. Vallejo spent more than $10 million in attorney fees. That’s $10 million you could have paid to creditors. It’s there as a last resort. It will get you results, but you probably won’t like it. It’ll probably take longer than you thought, and it’ll probably be far less efficient than you thought. But you will get there. In other countries, states and municipalities just kind of melt away.”