Bill on Bankruptcy: Stockton May Win the Battle, Lose the War
April 2 (Bloomberg Law) — Although Stockton, California established the right to be in a Chapter 9 municipal bankruptcy, the judge warned the city that victory may be short-lived if bondholders prove that pensioners must take a haircut along with other unsecured creditors. The second item on the new Bloomberg bankruptcy video with Bloomberg Law’s Lee Pacchia and Bloomberg News bankruptcy columnist Bill Rochelle uses the Eurofresh Inc. tomato bankruptcy to explain an emerging theory that secured lenders can’t use bankruptcy for their sole benefit while leaving Chapter 11 expense unpaid. Also, Rochelle predicts there may soon be a settlement in the Archdiocese of Milwaukee Chapter 11 case now that bankruptcy judge cut off attorneys’ fees. The video ends with discussion of a pivotal opinion by Circuit Judge Richard A. Posner in Chicago who explained why buyers of bankrupt businesses might find themselves liable for predecessors’ labor law violations.