Chapter 9 Bankruptcy Protection Is The Verdict For Hillview, Kentucky

On August 20, the town of Hillview, Kentucky announced that it had filed for Chapter 9 bankruptcy protection, according to the Louisville Courier-Journal.

In court documents, the town noted that it had sought bankruptcy protection following an $11.4 million jury verdict, which was approximately four times the town’s budget.

Hillview’s legal dispute lands them in debt

The small town – with a population of 8,000 – recently lost an appeal from an $11.4 million verdict in a 2012 legal dispute with Truck America Training School. This forced the town into insolvency because its annual budget is only $3 million. Moreover, the bankruptcy filing will stop interest of $3,700 a day from being applied, which would have increased the liability to $15 million.

In the verdict, the judge found that Hillview was responsible for losses incurred by Truck America due to a dispute over the contract with the town for a 40-acre location. According to the Courier-Journal, the school attempted to expand its training operations to incorporate heavy equipment training at the new location, but the town attempted to evict Truck America for a failure to make contractually-required lease payments. Throughout the dispute, Truck America Training was forced to sell off equipment and lay off several employees to remain operational.

The company also claimed to have made several settlement offers to Hillview, which included a proposal for the town to pay $6.2 million, with $5.2 million upfront and $1 million to be paid at a later date. However, according to a report in The State, the town rejected the settlement stating that it could not afford any payment agreement. The town then elected to file for Chapter 9 bankruptcy protection.

In court documents, Hillview officials listed estimated liabilities between $50 million to $100 million, with assets between $1 million and $10 million.

The town’s restructuring plan includes debt repayment

As required under its Chapter 9 protection filing, Hillview is currently seeking to resolve its financial problems by refinancing its municipal budget. The filing will provide Hillview with relief from its debts by creating a restructuring plan to reach a payment agreement with creditors, subject to the bankruptcy court’s approval. In the interim, the town has taken initial steps to pay down the judgment by earmarking $100,000 in its budget for 2016.

The town’s decision to file for Chapter 9 bankruptcy protection was also due in part to various outstanding creditors in addition to Truck American. However, according to town officials, municipal services will remain operational during the bankruptcy period.

This marks a trend of municipal bankruptcy filings since the recession

This marks the second time in five years that Hillview has sold bonds, as it issued $1.4 million of general-obligation debt in 2010. Although from a broader perspective, this continues a trend of municipalities filing for Chapter 9 bankruptcy protection since the financial crisis in 2007.

Hillview becomes the first city or town to file for bankruptcy protection since Detroit in 2013, and the third Chapter 9 filing of 2015, including a special district in California and a hospital in Oklahoma. This bring the number of towns and counties to file for Chapter 9 bankruptcy to 54 since 1980.

Are you a creditor in a bankruptcy?  Have you been sued by a bankrupt?  If you have any questions about your rights, please contact me, Joel Glucksman, at 201-806-3364.