Harrisburg, Pennsylvania Files For Bankruptcy

The economy has seen one of the greatest recessions of our time

. Businesses, individuals and even entire cities have decided to file for bankruptcy protection to make it through this difficult time. Thats the reality that Harrisburg, Pennsylvania is now facing, as the city filed for Chapter 9 bankruptcy earlier this month. The City of Harrisburg is now facing the backlash of citizens and public officials, in whats becoming a political debate of both morality and legality.

The state capital of 46,000 people has decided that its most responsible action is to file for bankruptcy, to be able to restructure their debts and give them time to recover. The city has found itself in over $300 million of debt, largely attributed to a failed trash incinerator project. The city cant keep up with creditors, and have attempted negotiations without success.

Some officials, however, are completely against the idea, including Harrisburg Mayor Linda Thompson, who has publicly stated that filing for bankruptcy is illegal. She stated on the city blog that [bankruptcy] clearly violates city law and shows a careless disregard for procedure and process. The law Thompson is referring to is called the Pennsylvanias Municipal Financial Recovery Act, which was amended just last year to prevent cities from filing Chapter 9.

The Mayors proposed solution involved increasing earned income taxes from 1% to 2%, which was voted out by the City Council. The Council and citizens of Harrisburg agree that filing Chapter 9 will give them the time to restructure, instead of paying Wall Street extra taxpayer dollars.

So what, exactly, is Chapter 9 Bankruptcy? Its similar to a private business filing for Chapter 11 protection, in that it gives time to negotiate with creditors. Its nothing like a Chapter 7 bankruptcy for obvious reasons: the city has no option of liquidating. A Chapter 9 is different from Chapter 11 in the sense that a judge cannot turn over the debtors operations to its creditors.

Many people are in agreement, that since there is no other solution, a Chapter 9 Bankruptcy is absolutely necessary. This capital city wont be let off the hook so easily; since historically, cities whove filed for bankruptcy have found it to be much more expensive, time-consuming and detrimental than they had anticipated. The city will risks its future credit rating and reputation with creditors in order to file, but many supporters agree that its a risk they will need to take.

For more information on bankruptcy news, visit us at our Killeen bankruptcy lawyer blog.

by: Davis Law

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