With tightening budgets and difficulty getting funding for important programs, there are school systems which may seek financial assistance by filing bankruptcy proceedings. School systems and other government agencies are still ultimately businesses, which need to balance assets and liabilities like any other. Kentucky readers may be interested in a recent state’s considerations of seeking debt relief in bankruptcy court for its public school system.

According to a recent article, the governor of a neighboring state has indicated that filing for Chapter 9 bankruptcy may be the best solution for the state’s school system. At almost $1 billion shortfall, the governor does not believe that continuing to supply hundreds of millions of dollars is a smart solution to the system’s financial woes. He believes that the action would be tantamount to a bailout.

Instead, he recommends that the state legislature seek bankruptcy protection through the court system. This would require the passage of a bill, which unfortunately may not be an option with a Democratic supermajority leadership. Other options available to the state’s leadership include a tax hike or to force a more affordable teachers’ union contract. None of these options seem to be palatable for all parties involved in the discussions, but something must still be done in order to maintain critical public school functions.

The decision to pursue debt relief through a bankruptcy filing can be a difficult decision for many in Kentucky. However, it can also be a way for any organization that is in debt to make a fresh start when faced with severe financial challenges. No matter what circumstances an organization is facing, it may be beneficial to speak with an attorney whose practice focuses on bankruptcy law. An attorney will be able to evaluate a client’s unique financial situation and discuss the various forms of bankruptcy or debt relief that are available.

Source: chicagotonight.wttw.com, “Gov. Rauner: Bankruptcy for CPS Might Be ‘Best Option'”, Paris Schutz, June 20, 2016