Five Years Ago This Week in Bankruptcy in Indiana – Cities

July 27, 2013 1:09 pm Published by

Some wise man said, “The more things change, the more they stay the same.” Since this week’s Bankruptcy in Indiana articles are devoted to comparing what I was writing about five years ago with what’s going on today,  I find that statement to be truer than ever. While my work as a debt consolidation lawyer centers around efforts to help stop foreclosure and offering personal bankruptcy help to individuals, couples, and small business owners, I don’t get involved with cities and towns filing bankruptcy. In fact, under Indiana law, there has never been any provision for a municipal bankruptcy.  

On the other hand, as I often say when I get together with the Anderson, Richmond, Bloomington, and Columbus bankruptcy lawyers who work in the Zuckerberg bankruptcy law offices,  keeping up with what’s going on in other states helps me explain to my clients and readers how the bankruptcy system itself works.

Five years ago, almost to the day, I was talking about the city of Stockton, California, which had just become the largest city in U.S. history to declare bankruptcy. I was explaining that, for most of our history in this country, cities and towns weren’t eligible for bankruptcy, but that a new section of the bankruptcy code, Chapter 9, had been approved just for that purpose. (Chapter 7, Chapter 11, and Chapter 13 bankruptcy laws apply to personal bankruptcy and small business bankruptcy.)

The big news this month is Detroit, which filed for Chapter 9 bankruptcy, seeking protection from creditors and unions to which the city is $18.5 billion in debt.

Obviously, when one of our leading cities gets to this point, it is a very, very serious situation. Even though, over the years, I have helped more than 35,000 different people file Indiana bankruptcy, and even though, to each of those people it was a very, very serious situation they were facing, we were never dealing in the billions of dollars. The only reason for me mentioning this enormous situation is that, if you’re even considering filing bankruptcy, there are several aspects of the Detroit story that might help you better understand how the process would work.

The bankruptcy doesn’t just move forward because Detroit has filed.  The petition has to be approved by the court.  In filing for Indiana bankruptcy, it’s the same way. Maybe the most important role the attorney plays is to make sure the financial disclosure process is done correctly.  That’s because, if mistakes are made, not only can the petition fail, but debtors could even expose themselves to criminal charges!

Stockton and Detroit each filed bankruptcy in federal court. (When one of the good bankruptcy attorneys in our offices files a bankruptcy petition, it’s in a federal court, the U.S. Bankruptcy Court Southern District of Indiana.)  Well, now the state of Michigan is saying that Detroit violated the Michigan constitution by filing.  However, that claim could have little effect because “federal law trumps state law”.

Talk about the more things change, the more they remain the same! I’ll be following the news about Detroit, and helping my clients file bankruptcy in Indiana and appreciate that a process exists to help them make a fresh financial start.


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This post was written by Mark Zuckerberg

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