Judge rules Stockton can enter bankruptcy


SACRAMENTO – A federal bankruptcy judge in Sacramento has given Stockton the green light to file for bankruptcy.

Bankruptcy Judge Christopher Klein made his ruling after hearing three days of cross examination last week from the city of Stockton and its creditors. He also read through hundreds of pages of testimony.

The city’s creditors had argued Stockton failed to negotiate in good faith before turning to bankruptcy, but Klein said it was the creditors who acted in bad faith.

Bankruptcy will likely allow the city to avoid repaying its debts in full.

“After nine months and millions of dollars in legal fees, the Judge validated what we have been saying from the beginning, that the City is insolvent and needs the protection of bankruptcy to adjust its debts,” said City Manager Bob Deis.  “The next steps are to confirm a Plan of Adjustment through the restructuring of our debt, begin the recovery process and move Stockton forward.”

One of Stockton’s leading creditors, Assured Guaranty, said in a press release Monday “it respectfully disagrees with the Court’s ruling that the City of Stockton met its burden of satisfying the Chapter 9 eligibility requirements. Further, Assured Guaranty believes that the proceedings last week demonstrated that the citizens and other stakeholders of Stockton will all benefit from a consensual approach that truly resolves the City’s financial predicament and treats all of Stockton’s stakeholders in a fair and equitable manner.”

Stockton is now the largest city in the United States to declare bankruptcy.

“Today’s decision marks a new day for the City of Stockton,” said the community group Stockton Forward. “While we still have a long road ahead, we now have a starting point to move forward. Collaboration, cooperation and dedication from Stockton’s leaders and citizens are key to a strong recovery. Stockton Forward is ready to help bring together our community to restore and rebuild the region – local leaders, city staff, law enforcement, community groups and engaged citizens. We have already begun to see an improvement in our local economy and it’s just the beginning. The best is yet to come for Stockton.”


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