Alabama Files Largest Chapter 9 Bankruptcy
Jefferson County, Alabama files largest Chapter 9 bankruptcy making it the biggest Chapter 9 filing in municipal bankruptcy history in the U.S.
Alabama’s most populous county (658,000) filed after the commission and receiver entered into a comprehensive term sheet setting forth a framework for the resolution of the sewer system crisis which put the county more than $4 billion into debt by an alleged corruption-riddled sewer project.
The chapter of the U.S. Bankruptcy Code providing for reorganization of municipalities was enacted in 1934 during the Great Depression. Since then, there have been fewer than 500 municipal bankruptcy petitions filed.
Interesting in the process was the fact that the county’s biggest creditor, JPMorgan Chase, had wanted to avoid bankruptcy, according to company spokeswoman Jennifer Zuccarelli who said that they “offered very substantial financial concessions to make the deal happen.”
Alabama Chapter 9 Bankruptcy
This is a Chapter 9 bankruptcy which provides the municipality protection from creditors. Meanwhile it develops and negotiates a plan for adjusting its debts. That reorganization is usually achieved by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
Since 1981, 37 cities, towns, villages and counties nationwide have filed for Chapter 9 bankruptcy. That includes six in Alabama now that Jefferson County has filed.
Jefferson County, with a population of about 660,000, has some of the richest neighborhoods in the country as well as pockets of urban poverty and blight.