Can or Will Justice File Bankruptcy? part 1

Posted in the Justice Forum

Peter Francis Geraci

La Grange, IL

#1 Aug 16, 2011
In difficult economic times, the demands for municipal services increase while revenues from declining property values or decreasing sales tax diminish. For some municipalities or units of local government, the lack of adequate revenues may create a financial disaster. In such a case, a municipality may imitate the private sector and seek protection through a bankruptcy filing. The federal Bankruptcy Code provides a method for a local government to file for bankruptcy; however, state law makes the actual filing exceedingly difficult, if not impossible.
Many people are familiar with the three most common types of bankruptcy filed under Chapters 7, 11, and 13, especially in light of recent high profile bankruptcy filings such as General Motors. However, municipalities cannot seek protection under the traditional bankruptcy chapters because those chapters are reserved exclusively for private individuals and corporations. Instead, a municipality must seek relief under the lesser-known Chapter 9. Although similar to reorganization under Chapter 11, Chapter 9 contains several significant and noteworthy differences. First, and perhaps most importantly, the municipal government must have a specific grant of authority by the state legislature to be a debtor in bankruptcy. This grant of authority cannot be general in nature, but must specifically mention and reference the bankruptcy code.(County of Orange, 183 B.R. 594 (C.D.Cal 1995)) Secondly, the municipality must:(1) have the agreement of its creditors; (2)
fail to obtain an agreement with its creditors after good faith negotiations; (3) show that negotiations would be impractical; or (4) reasonably believe that a creditor will attempt to obtain a preference as the term is defined by the Bankruptcy Code.
Until July 6, 2009, only one Illinois local government -- Slocum Lake Drainage District of Lake County -- had filed for bankruptcy in Illinois in the previous twenty years.(Slocum Lake Drainage District of Lake County, 336 B.R. 387 (N.D.Ill. 2006)) However, on the creditors’ motion, the bankruptcy court dismissed Slocum Lake’s bankruptcy petition thereby denying Slocum Lake the protections provided by the Bankruptcy Code. The Slocum Lake case is extremely instructive for an Illinois local government currently experiencing severe financial distress. In finding that Slocum Lake (and indeed, any Illinois municipality) could not directly file for bankruptcy, the court held:
The Debtor has the burden of proof to establish that it is eligible to be a debtor under Chapter 9. The court finds that the Debtor has not met that burden....[T]he Court finds that the general authority contained in [Illinois statutes] is insufficient to meet the "specifically authorized" requirement...Had the Illinois General Assembly intended to specifically authorize this Debtor or other municipalities to seek relief under Chapter 9, it could have easily drafted appropriate legislation, but has not done so.
Peter Francis Geraci

La Grange, IL

#2 Aug 16, 2011
PART 2
However, this long history of unsuccessful municipal bankruptcies in Illinois ended when the Village of Washington Park filed for Chapter 9 bankruptcy on July 6, 2009. While this case is in its earliest stages, as of publication of this article no creditor has made an objection to the Village of Washington Park’s eligibility to be a debtor in bankruptcy. As the only municipal bankruptcy filing in Illinois in the last twenty years or more, the negotiations and outcome of the Village of Washington Park’s bankruptcy filing are sure to become a roadmap for any future Chapter 9 filings in Illinois.
Perhaps the only state subdivision with a specific grant of authority for bankruptcy in Illinois is the Illinois Research Park Authority, a division of the state executive branch. All other municipal governments must follow the procedures required by the Local Government Financial Planning and Supervision Act (the "Act")(50 ILCS 320/1 et seq.). The Act provides a means by which an Illinois municipal government undergoing a financial emergency may seek relief. The Act creates a special financial planning and supervision commission to manage insolvent municipal governments. To obtain relief, the Act requires that an insolvent municipal government petition the financial planning and supervision commission and essentially enter into receivership under the control of the commission. Under this process, the commission or its appointed financial planner has broad powers to restore solvency to the municipal government. One of the powers afforded the commission
is to recommend that the municipality seek relief under Chapter 9. Only upon the commission’s recommendation can Illinois local governments seek relief under the Bankruptcy Code.(Slocum Lake Drainage District of Lake County, 336 B.R. 387 (N.D.Ill. 2006))
While a bankruptcy filing remains an option for an Illinois municipality experiencing an extreme financial crisis, the difficulty in obtaining the requisite authority and the necessary ceding of local control to a state agency makes bankruptcy an impractical option for all but the most severe financial emergencies. The difficulty of the process likely explains why no municipality has successfully undergone the Chapter 9 process in Illinois in the past twenty years until the Village of Washington Park filed in July 2009.
last dance

AOL

#3 Aug 16, 2011
thanks for the important information keep us informed were all concerned residents and tax payers
blues

United States

#4 Aug 16, 2011
This is great information. The Village of Justice is a lost cause and I am scared for my home.
sour grapes

AOL

#5 Aug 17, 2011
Peter Francis Geraci wrote:
In difficult economic times, the demands for municipal services increase while revenues from declining property values or decreasing sales tax diminish. For some municipalities or units of local government, the lack of adequate revenues may create a financial disaster. In such a case, a municipality may imitate the private sector and seek protection through a bankruptcy filing. The federal Bankruptcy Code provides a method for a local government to file for bankruptcy; however, state law makes the actual filing exceedingly difficult, if not impossible.
Many people are familiar with the three most common types of bankruptcy filed under Chapters 7, 11, and 13, especially in light of recent high profile bankruptcy filings such as General Motors. However, municipalities cannot seek protection under the traditional bankruptcy chapters because those chapters are reserved exclusively for private individuals and corporations. Instead, a municipality must seek relief under the lesser-known Chapter 9. Although similar to reorganization under Chapter 11, Chapter 9 contains several significant and noteworthy differences. First, and perhaps most importantly, the municipal government must have a specific grant of authority by the state legislature to be a debtor in bankruptcy. This grant of authority cannot be general in nature, but must specifically mention and reference the bankruptcy code.(County of Orange, 183 B.R. 594 (C.D.Cal 1995)) Secondly, the municipality must:(1) have the agreement of its creditors; (2)
fail to obtain an agreement with its creditors after good faith negotiations; (3) show that negotiations would be impractical; or (4) reasonably believe that a creditor will attempt to obtain a preference as the term is defined by the Bankruptcy Code.
Until July 6, 2009, only one Illinois local government -- Slocum Lake Drainage District of Lake County -- had filed for bankruptcy in Illinois in the previous twenty years.(Slocum Lake Drainage District of Lake County, 336 B.R. 387 (N.D.Ill. 2006)) However, on the creditors’ motion, the bankruptcy court dismissed Slocum Lake’s bankruptcy petition thereby denying Slocum Lake the protections provided by the Bankruptcy Code. The Slocum Lake case is extremely instructive for an Illinois local government currently experiencing severe financial distress. In finding that Slocum Lake (and indeed, any Illinois municipality) could not directly file for bankruptcy, the court held:
The Debtor has the burden of proof to establish that it is eligible to be a debtor under Chapter 9. The court finds that the Debtor has not met that burden....[T]he Court finds that the general authority contained in [Illinois statutes] is insufficient to meet the "specifically authorized" requirement...Had the Illinois General Assembly intended to specifically authorize this Debtor or other municipalities to seek relief under Chapter 9, it could have easily drafted appropriate legislation, but has not done so.
@ Peter Francis part one and part two- Nice copy and paste article. However Justice is just fine, the village is now getting ready to celebrate a 100 years, Justice must be doing something right to last this long.

Go Coalition! Let's celebrate
fireman

United States

#6 Aug 17, 2011
Yeah right the nasty streets the flooding and the lazy workers at the village. I wanna celebrate the jobs for votes and the idiots that were hired. This is bull!
We got nuttin

Willowbrook, IL

#7 Aug 17, 2011
Don't celebrate until the Coalition Party trustees and the Mayor start to DO SOMETHING about this year's huge deficit ($500,000), the $4,000,000 in Village debt and the $9,000,000 in underfunded pensions. The banks will not loan the Village anymore money. The Village residents will have to live with "nasty streets" and flooding issues for a very long time. The Village has no money. The Village has a spending problem and a revenue problem.
Thanks Coalition Party Trustees for doing "nuttin" about these serious financial problems since being elected.
fireman

United States

#8 Aug 17, 2011
Hey wait! The coalition hired a bunch of losers to work getting paid with our money. They did something just not the right thing.
Po Folk

Plainfield, IL

#9 Aug 17, 2011
Well, as I see it, it's a sad time for a lot of areas not just Justice, However, they are doing nothing to help the Village's deficit by adding jobs to friends and paying friends more money than they already make. This has been posted on Topix many times. So what as residents do we do? I know one thing for sure show up at board meetings and demand answers to your question posted on here. The same people are at the board meeting, never nayone new expressing their concerns. Do you actually the Mayor and Trustees care about whats posted on Topix? Hell no, they laff I am sure. Put pressure on them to answer for the excessive spending ask for answers, demand answers, the 2012 election is not far off, show up voice your concerns and do whats necessary as residents. As for the other entities within the Village, the Police, Fire and Public Works, they can't do anything to change the current status, so they will spend spend spend until it's to late which should be right around election time...
sour grapes

AOL

#10 Aug 17, 2011
We got nuttin wrote:
Don't celebrate until the Coalition Party trustees and the Mayor start to DO SOMETHING about this year's huge deficit ($500,000), the $4,000,000 in Village debt and the $9,000,000 in underfunded pensions. The banks will not loan the Village anymore money. The Village residents will have to live with "nasty streets" and flooding issues for a very long time. The Village has no money. The Village has a spending problem and a revenue problem.
Thanks Coalition Party Trustees for doing "nuttin" about these serious financial problems since being elected.
Celebrate, celebrate we love the mayor
Celebrate, celebrate we all love Justice
Celebrate, celebrate we have no money
Celebrate, celebrate we all love patronage
Celebrate, celebrate we all love to party
Celebrate, celebrate let's all celebrate the Centenial

Whooo Hooo I love the Centenial comitee and S. Small
Celebrate, celebrate and celebrate!!
100 bottles beer

Plainfield, IL

#11 Aug 17, 2011
sour grapes wrote:
<quoted text>
Celebrate, celebrate we love the mayor
Celebrate, celebrate we all love Justice
Celebrate, celebrate we have no money
Celebrate, celebrate we all love patronage
Celebrate, celebrate we all love to party
Celebrate, celebrate let's all celebrate the Centenial
Whooo Hooo I love the Centenial comitee and S. Small
Celebrate, celebrate and celebrate!!
Did you get your party hat???? There ordered !
Sue and The Gang

La Grange, IL

#12 Aug 17, 2011
Celebrate good times,come on. It's a celebration!!!!
sour grapes

AOL

#13 Aug 18, 2011
Sue and The Gang wrote:
Celebrate good times,come on. It's a celebration!!!!
I am having so much fun, this has to be illegal. Is there an ordinance in Justice about having so much fun. Lets all ask uncle Richie, he's a pro funster. Hey who took my pants!

WHOOO HOOO LETS CELEBRATE! THE VILLAGE DOESN'T HAVE ANY MONEY, BUT THE TAX PAYERS DO WHOOO HOOO! LETS CELEBRATE!
sour grapes

AOL

#14 Aug 18, 2011
100 bottles beer wrote:
<quoted text>
Did you get your party hat???? There ordered !
Hey! I got my hat, got my bracelet, got my T-shirt in fifteen fun colors, I got my cup, I got my tote bag, and HEY! I also have my yard sign. The only thing I DON'T GOT IS ANY MONEY- JUST LIKE MY VILLAGE. WHOOO HOOO!! LET'S CELEBRATE- WHOOO HOOO WE ARE BROKE-
OH YEAH LETS CELEBRATE 100 YEARS LETS CELEBRATE!!
a sad village

AOL

#15 Aug 18, 2011
bar of justice strip clubs hooka bars welcome too the coalition party
The Happy News Dwarf

Elmhurst, IL

#16 Aug 18, 2011
Hey....
We haven't seen any Happy News lately. Did the money well run dry for our fairy tale team? And we were so looking forward to all of the happy info on the Centennial and the great job the new trustees are doing....
Seems as though the happy news team has turned grumpy. I've got an idea....GET A JOB......
sour grapes

Berwyn, IL

#17 Aug 19, 2011
The Happy News Dwarf wrote:
Hey....
We haven't seen any Happy News lately. Did the money well run dry for our fairy tale team? And we were so looking forward to all of the happy info on the Centennial and the great job the new trustees are doing....
Seems as though the happy news team has turned grumpy. I've got an idea....GET A JOB......
No news is good news, I am just wondering how they are going to return the funds they have collected so far, I think about $1,995.00.

Let's see take away the funds USED FOR Richie's beer, they should have about $19.95 left. Whoa!... But wait there is more, LET'S ALL CELEBRATE WITH SUE AND CO. WHOO HOO! CAN'T WAIT. S.S. is bringing free COFFEE. Thanks Sue.
Clark Kent

Willowbrook, IL

#18 Aug 23, 2011
Mayor Kris must think that his actions and the actions of the current Coalition Party Board members are going to help prevent the Village from going bankrupt in the near future. The previous Board was taking the necessary steps to reduce expenses and were pursuing a stategy that would increase revenue in the long term without raising taxes. The new Coalition Party Board members seem to be undermining the actions taken by the previous board to reduce expenses by hiring back layed off personel (that supported their Coalition Party campaign). The hiring back of these Coalition Party members (Shirley Shilka and Gerry Mendrella) could cause major problems if they attempt to lay off union represented police officers or public works employees. The new Coalition Party Board members are looking at a Truck Stop proposal that would eat up a majority of the TIF-3 moneyand land. The Mayor and several Coalition Party Board members are pushing a proposal that would change the smoking ordinance to allow a Hooka Bar to open in the Coalition Party's former headquarters on 79th St.,and would open the door for Hooka Bars throughout the Village.

Here are some questions that Village residents should be asking:

- What actions are the Mayor and the Coalition Party Board members taking to help save our Village from financial ruin(the current deficit for this year is over $500,000)?

- How will they pay for the multiple lawsuits that the Mayor has gotten the Village involved in?(The Board voted to settle one of these lawsuits at last night's Board meeting for an undisclosed amount of money.)

- Do they have any plan that will help to even start to pay off the $13,000,000 of debt ($4,000,000 in bond debt,$9,000,000 in unfunded pension debt) that was incurred over the past 20 years?

- Do they have a plan to make our Village financially sustainable in the future?

The Village has spent more money than they collected in 18 of the last 20 years. If the Village was a business it would have been OUT OF BUSINESS years ago.

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