Submitted by Jen Jones on Thu, 08/16/2012 - 12:02pm
If there’s any lesson from our recent recession, it’s that copious spending can be the quickest way to beating down the door of bankruptcy. These are the recent lessons at least from many an American municipality, as cities and towns all across the country are now facing the plight of the people they serve, spending down their previously well-kept coffers to the brink of a bankruptcy filing and beyond.
In fact, just last month, coming in the major footsteps of California cities like Mammoth Lakes and Vallejo, Stockton, California became the biggest U.S. city ever to file for bankruptcy.
According to a recent Reuters article, Stockton’s “bust,” followed years of booming conditions, a familiar cycle predicated on a strong stock market that bolstered pension funds and an unrivaled increase in real estate values that brought in a ton of tax revenue, all of which gave the city a false sense that wage hikes and extended health insurance for retirees was the way to go to retain the municipality’s then-valuable 1990s workforce.
But fast forward to the next decade, and as Reuters reporter Jim Christie illustrates, spending turned to fiscal mismanagement as revenue risks overcame Stockton’s actual financial rewards.
“As the 2000s advanced, Stockton continued to spend freely with the support of voters, politicians from both parties, employees and bondholders. Rating agencies were quiet about any risks and only started to downgrade the city's creditworthiness two years ago… City officials, looking to transform their sleepy downtown, approved spending on large projects to raise Stockton's profile and turn it into a bedroom community for San Francisco and the Bay Area.”
Enter the housing crisis of the late 2000s, plummeting home prices, and a general state of fiscal shock for many California localities, and Stockton, like so many of our nation’s debtors, couldn’t stand a chance.
“Stockton has earmarked $3.5 million for bankruptcy court expenses because it hopes for a quick exit from Chapter 9,” writes Christie. “Bondholders, employees and retirees will be hurt in the process.”
But before you think a bankruptcy filing can hurt you too, there are plenty of lessons for individuals to learn from the Stockton situation, including valuable lessons in spending within your means before, during and after your bankruptcy.
If you’re in your own Stockton-style situation and interested in the process of securing a better financial future in North Carolina through the safe havens of bankruptcy, remember that contacting an experienced bankruptcy attorney can help you face even your worst financial fears. In particular, the bankruptcy professionals at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to “Stock-up” on their advice.
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