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California City Will Be the Largest to Ever Declare Bankruptcy

Justin Sullivan, Getty Images

California has certainly had its share of financial woes, and now the city of Stockton, about 80 miles east of San Francisco, is set to become the largest American municipality to declare bankruptcy.

The city of nearly 300,000 people is $26 million in debt, and City Manager Bob Deis said that while deals were being worked out with about a third of Stockton’s creditors, it wouldn’t be enough to stave off a Chapter 9 bankruptcy filing before the new fiscal year begins on Sunday.

The city council approved a pendency plan — which is essentially a new budget that details the day-to-day operations under bankruptcy — on a 6-1 vote. Employees, vendors and service providers will continue to be paid, but most other expenditures will be scaled back.

While Stockton is the largest American city to declare bankruptcy, the bankruptcy itself isn’t even close to being the biggest municipal bankruptcy in US history. That dubious honor goes to Alabama’s Jefferson County, which last year filed for protection with $4.2 billion in debt.


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