Kentucky Town Files for Chapter 9 Bankruptcy

by San Antonio Attorney

Hillview, Kentucky filed for bankruptcy on Thursday. The town has a population of 8,000.

The last municipal bankruptcy was filed by Detroit two years ago. Since 1980, there have been a total of 54 cities, towns and counties that have filed for bankruptcy protection from their creditors.

Hillview does not have funds to pay for legal damages and so it filed for bankruptcy.  There have been three Chapter 9 filings this year, which includes a special district in California and Oklahoma hospital.

Tax revenues are improving as the economy recovers, easing the burden on local governments. The bankruptcy of Detroit was painful, and so local governments and their creditors were motivated to come up with alternative solutions.

Despite a wave of bankruptcy filings during the recession that came to an end six years ago, counties and cities hardly ever turn to federal court to find debt relief. Nevertheless, seeking bankruptcy court protection is no longer a taboo as it was before for governments suffering from debilitating financial stress.

Hillview’s Chapter 9 filing is the result of a breach of contract with Truck America Training, over a property sold. A court denied the city’s appeal to pay more than $11 million in damages to the local company.

Hillview estimated its debts up to $100 million and assets up to $10 million, based on the filing in Louisville bankruptcy court. Truck America is its biggest unsecured creditor.

According to city attorney Tammy Baker, the accumulating interest from the court judgment is about $3,700 per day. It was impossible for the city to afford such payments. The city council was forced to seek for bankruptcy protection to stop accumulating any more interest and try to work out a payment plan they can afford.

But city services will not be interrupted despite of the bankruptcy according to Baker. She said the city’s actions are in fact preventing that from taking place.

Depending on the type of Bankruptcy Help you need, you can have the option to restructure your debt while protecting your assets.

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