Alabama Supreme Court Rules Cities, Counties Can Declare Bankruptcy
by Joel R. Glucksman
Alabama’s state Supreme Court ruled that cities and counties that are not holding bond debt are still protected under bankruptcy law.
The ruling supports Jefferson County, which filed for protection last November after officials and creditors could not agree on a plan that would have reduced the county’s sewer debt by roughly $1 billion. After the county filed bankruptcy, Jefferson County creditors, including JPMorgan Chase, opposed the court’s decision and requested the case be tossed out, arguing that the majority of the debt was in the form of warrants, and not bonds. The court ruled that state bankruptcy law does not impose a requirement for cities and counties to have outstanding “refunding bonds or funding bonds” prior to seeking protection, according to Bloomberg.
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