Jefferson County, AL Nears Record Breaking Bankruptcy

: Chris Lee Law Firm

  Filed under: Chapter 9

Jefferson County Bankruptcy

It may come as a surprise to many that an entire city, or county, could file for bankruptcy. In fact, there have been many municipalities, big and small, that have sought debt relief through Chapter 9 bankruptcy protection.  Although they aren’t commonly publicized,  Chapter 9 bankruptcies involve  a reorganization of debts for cities experiencing financial hardships. One of the  largest, and most well-known, Chapter 9 cases involved millions of dollars in debt reorganization for Orange County, California in 1994. However, Jefferson County, Alabama has until next Thursday to decide whether their fate is to become the largest Chapter 9 bankruptcy case in history.

History In The Making

The trouble for Jefferson County began a few years back when their debts increased as a result of increased costs for a new sewer system. They relied too heavily on insured bonds to help fund the debts, which eventually collapsed as the result of their own risky endeavors. Allegations came into play over practices of corruption surrounding the bonds, which spawned into practices of bribery and conspiracy. Many local officials were eventually convicted of these practices and more civil suits emerged. Earlier this year, the county’s financial problems increased when a court ruling removed an occupational tax that funded nearly $70million in revenue a year.  Another $60million was spent to clean up the tornado that devastated the area back in April of this year.

Although Jefferson County is probably not intending to set any records, their time is running out to make a decision. They received a debt settlement offer from creditors outside of the bankruptcy court and are organizing a vote as to whether the offer will be accepted. County Commissioner, Jimmie Stephens, told the Financial Times, “This offer increases optimism that a negotiated solution can be found.”


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