A 4th California City Ponders Filing Bankruptcy

Atwater, California a city of about 28,000 people in California’s Central Valley is trying to avoid becoming the fourth California city to file for municipal bankruptcy this year, its mayor said. California is no stranger to having its cities file for bankruptcy. Since late June, the California cities of San Bernardino, Stockton, and Mammoth Lakes have filed for bankruptcy protection. Atwater is scrambling to keep their name off of this dubious list.

If Atwater does decide to file for bankruptcy, there are a few state imposed hoops that it must 1st jump through before leaving their creditors high and dry. California law requires a local government to first declare a “fiscal emergency” or to go through a 60 to 90 day confidential negotiation process with its creditors before it files for municipal bankruptcy.

These aforementioned confidential negotiations with creditors is something not found in your typical consumer chapter 7 or chapter 13 bankruptcy filing. In those cases, any negotiations of debt quite often go on deaf ears as the creditors are not usually willing to accept payments that debtors can afford, in fact, often creditors raise the interest rates, tack on late payment fees, and the amount of debt owed quickly increases.

The amusing part is how after the consumer has filed for bankruptcy relief, the once unwilling-to-deal creditors are now willing to take anything they can get. Once a consumer has filed for bankruptcy, there is no reason to pay the creditor as the debt will be erased completely in a chapter 7 bankruptcy and will be pennies on the dollar re-paid in a chapter 13 bankruptcy. If you have recently filed bankruptcy, stop your communication with your creditors, direct them to contact your experienced Glendale AZ bankruptcy attorney and let an expert deal with these creditors.

Things don’t look promising for this small California town as Atwater has roughly $95 million in outstanding debt. This $95 million dollars is a mixture of bonds related to the sewer system in Atwater as well its now-defunct Atwater redevelopment agency. Who is to blame for the dire financial straights that Atwater finds itself in? Shouldn’t Atwater city officials be held accountable for the poor decisions made to create this mess?

One such Atwater city official, Mayor Carol Joan Faul in a telephone interview with Dow Jones Newswires states, “We are planning to stay current on our … bonds,” Faul goes on to explain, “We are hoping to avoid” bankruptcy, she said, “but as far as I’m concerned, we may have to declare a fiscal emergency” on Oct. 3.

To me it sounds like the steps are being taken and that the writing is on the wall. Pencil Atwater in on the list of California cities filing for bankruptcy protection. Should jobs be lost and heads roll? — Yes! Will anyone be held accountable?? — Stay tuned and see. Atwater is just the latest embarrassment to a state that really needs to evaluate the direction it is heading.

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The My AZ Lawyers
By Candace Kallen
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