Local California government files for bankruptcy

by Like consumers, local governments sometimes go to lenders to borrow money to pay for unforeseen expenses. Though consumers usually approach short term lending companies, authorities usually obtain government loans that can help fund infrastructure updates, project initiatives and other unexpected emergencies.
 However, in Stockton, California, city lawmakers took out too many loans and are floundering while trying to pay them off. City councilmen recently proposed a new budget that indicates the city will soon declare bankruptcy. Stockton to declare bankruptcy According to Reuters, Stockton will soon be the largest American city to declare Chapter 9 bankruptcy, due to the approval of the budget calling for filing. The city has been trying to avoid bankruptcy for three months, the source reported, though bailout talks were suspended Monday when negotiations could not be made before the beginning of the next fiscal year on July 1. Mayor Ann Johnston told Reuters the only other option was declaring Chapter 9. The source detailed the new proposal includes a $155 million spending plan, which also eliminates the medical benefits for retirees, which will account for a $26 million economic boost. The reason for bankruptcy is because of two decades of financial mismanagement, Reuters noted, which included accruing a large amount of debt and doling out too much money for city employee benefits. The city has not seen a lot of revenue in past years, adding to the problem. As such, council members approved taking out loans from the federal government totalling $3.7 trillion. Debt collectors could help Many cities have had to declare bankruptcy in the recent past. Reuters reported Bridgeport, Connecticut, Harrisburg, Pennsylvania and Vallejo, California, have all had to approach this action in the last four years. To avoid such occurrences in the future, city council members may want to consult with a debt recovery service. Debt collectors could help local governments recover payments that they are owed from consumers, as a result of traffic violations, ordinance citations and other tickets. According to CNNMoney, cities and other government organizations have seen great success and a boost in revenue if they hire a third party collector to track down owed debts. When Pittston, Pennsylvania, faced large, unpaid fees for the town's garbage collection service, they looked to debt recovery agents for relief. The city's deputy chief administrative officer, Marcus Jones, told CNNMoney that lawmakers estimated the local government would be able to recover $500,000 in missing payments.