31 October 2014
Following yesterday's live tweeting of the confirmation hearing for Stockton's Chapter 9 municipal plan of adjustment, I already knew that Judge Klein had confirmed the plan. Indeed, I had predicted that he would confirm the plan here. For the rest of the story you can read an excellent account in Bloomberg here.
Researching the Stockton case was my initial foray into Chapter 9 bankruptcy. Earlier this year I published my first article on the Stockton case and what it takes to get a plan confirmed in Municipal Bankruptcy: When Doing Less Is Doing Best (download here). Two more articles will be coming out in 2015: Who Bears The Cost: The Necessity for Taxpayer Participation in Chapter 9 (download here) and Who Bears the Burden: The Place for Municipal Residents in Chapter 9 (download here). Great reading for the ever-shorter days of autumn.
Back to Stockton. I don't care to count my posts on this case but if you go here you'll read why I had hoped that the plan, as ultimately structured, would not be confirmed. In short, even with Judge Klein's invitation, neither the city nor any creditor was willing to take on the behemoth of CalPERS. Thus, retirees will recover a great share of what's owed than other creditors. Good social policy but bad bankruptcy law.
And, to my further disappointment, Detroit's plan looks headed to confirmation with similarly discriminatory treatment of creditors. Oh well. I don't know what I would have done had I represented the shafted creditors but I know that non-confirmation would have been better grist for the scholarship mill.