Chad Deal 8:22 p.m., May 20
Vallejo's Bankruptcy Exit Plan Would Squeeze Creditors
On Tuesday, the City of Vallejo filed its plan to exit bankruptcy. The city northeast of San Francisco had filed for Chapter 9 in May of 2008 after unions rejected wage cuts. Under the plan, general unsecured creditors would collect 5% to 20% of their claims, according to BloombergBusinessweek. Those creditors include retirees and former employees. Health care benefits for 400 retirees and surviving spouses are scheduled to drop to $300 a month from $1500 a month that some receive, according to the Wall Street Journal. The city will maintain its workforce at 312 employees, down 40% from 2004, according to the Journal. The city says it cannot provide essential services while paying its debts. The plan must be approved by creditors before the bankruptcy judge decides whether to approve it, although the judge will have some latitude in the process. BloombergBusinessweek says Vallejo would become the first general municipality that would not fully repay bankruptcy debts.