Creditors of Stockton Fight Over Pension Funding While in Bankruptcy

Federal and state law clash again in a pending bankruptcy case but this time it is over pension plans.  Facing millions of dollars in debt, Stockton, California filed for relief under Chapter 9 of the US Bankruptcy Code in June.  Two bond companies are arguing that the city is improperly funding employee pension funds while not paying its debts.

State law protects employee pensions; however, federal bankruptcy law may trump state law resulting in the pension plans being impaired.  Employees of other debt-laden cities need to follow this bankruptcy case closely to see what happens to the employee pension accounts. Read Full Article.

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