Bankrupt San Bernardino faces off against creditors in federal court

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San Bernardino has until August 31 to give the feds a full list of its creditors in other documentation supporting the city's petition for Chapter 9 bankruptcy after the city filed for emergency bankruptcy status earlier this month.

U.S. Ninth Circuit Judge Meredith A. Jury also agreed to give creditors more time to object to San Bernardino’s bankruptcy petition.

The city originally wanted to give creditors no more than a month to challenge its petition for bankruptcy. San Bernardino attorneys say the court needed to set a hard deadline or risk worsening a crippling cash flow problem and $46 million deficit.

“[The city’s] prime directive is to continue providing essential services,” said City Attorney Paul Glassman, even while its navigating through the municipal bankruptcy process. In court, San Bernardino agreed to extend the deadline to October 24.

Under Chapter 9, the city will be able to start paying off some debts now while putting off others until a to-be-determined date — and possibly even reducing the amount they have to pay.

Among the top creditors is the San Bernardino City Professional Firefighters. The city owes its firefighters about $1.4 million as part of a legal settlement over lost wages.

Union attorney Corey Glave says creditors need the additional time to review the city’s finances and challenge any proposed debt restructuring plan.

“Any creditor, whether it’s an employee or a bank, want to know what a city is claiming as part of its bankruptcy,” says Glave.

“They might actually be insolvent but they kind of have to show that. All we’re saying is, 'Hey, at least make the filings you’re supposed to first, and if the filings are satisfactory, we’re not gonna challenge you.'”

Other large creditors include Kohl’s department store and several large financial institutions that hold the city’s bonds. The total list of creditors could top 5,000.

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