The South Bay Law Firm Law Blog highlights developing trends in bankruptcy law and practice. Our aim is to provide general commentary on this evolving practice specialty.
 





 
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      Debt Equity: Recharacterization of Debt in Bankruptcy Proceedings Ė And What To Do About It
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    California’s Ongoing Efforts to Limit Municipal Bankruptcies

    Since late January, California’s state assembly has considered¬†legislation designed to impose additional hurdles on cities, services districts, and other California municipalities that need to rehabilitate themselves under Chapter 9.

    Supporters of California Assembly Bill 155 (AB 155)¬†– which requires California municipalities to to receive filing approval from a state panel prior to commencing a Chapter 9 proceeding – argue that the bill will preserve the credit-ratings of local municipalities and protect local taxpayers.¬† Opponents of the bill argue that it is merely an “end run” by public employees’ unions¬†around a process that permits municipalities to reject¬†union contracts and rehabilitate themselves.¬† Some additional background, and¬†a copy of the bill as introduced, is available on an earlier post on this blog.

    On June 3, AB 155 took a step toward passage when it cleared the California State Assembly by a vote of 43-16, with no Republican support.¬† A copy of the bill, as amended, is available here.¬† Governor Schwarzenegger has reportedly not taken a position on the bill, according to an article in Thursday’s Sacramento Bee.

    The bill now goes to the California State Senate.

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