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U.S. Judge Denies Creditors’ Request to Set Bankruptcy Deadline for Alabama County


October 1, 2012
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Alabama’s Jefferson County will have more time to work out the details of its bankruptcy restructuring after a federal judge ruled against setting a deadline for the distressed county to repay its creditors. U.S. Bankruptcy Judge Thomas Bennett denied a request made by Wall Street creditors to impose a finite deadline for unveiling an exit plan, agreeing with Jefferson County attorneys who argued that the complexity of the area’s finances warranted a flexible timeline, according to Reuters. In his ruling, Judge Bennett argued that imposing a strict date to hammer out the details of a complicated municipal bankruptcy would be “premature.” However, the creditors, which are heavily invested in sizable sewer debts, argue that the county’s officials are dragging their feet in developing an exit strategy. Further, the creditors note that administrators are delaying increasing rates for customers who use the sewage system, the proceeds of which will go toward repaying the county’s debts. County official David Carrington said he hopes Jefferson will be able to develop a plan for emerging from bankruptcy law protection by the end of the year, Reuters reports. This is a shorter timeline than his initial projections of early 2013. The county was forced to file for bankruptcy protection last November after sewer deals with creditors went bad and a local payroll tax worth $60 million fell through. The latter prompted hundreds of layoffs and reductions in medical and government services. In addition to cuts in public services, the county is also seeking to close down the Cooper Green Hospital, a facility that provides medical care for the indigent. The county hopes the decision will save money, but the city of Birmingham is fighting the move. The issue is expected to be discussed in a bankruptcy court on September 27.