Central Falls, Rhode Island, has entered bankruptcy , driven by an overwhelming burden of pensions. The filing is somewhat ironic when considering the city’s motto of “a city with a bright future.”
Central Falls is Rhode Island’s poorest city, with its decline beginning in the 1970s as manufacturers left the area. Crime rose as the city’s economics declined. In 1986, a Rolling Stone crowned the city the Cocaine Capital of New England.
The march toward bankruptcy began in the past few years as Rhode Island slashed local aid to cope with the financial crisis and the recession it spawned, said state Senator Elizabeth Crowley.
Central Falls turned to the bankruptcy courts for protection on August 1, 2011 after retirees failed to accept cuts in pensions and benefits. That pushed the municipality into insolvency, according to Robert Flanders, a former state Supreme Court justice named to oversee Central Falls finances earlier this year. The city asked the court to let it impose “a prudent plan” to adjust what it pays retirees.
The city of about 18,000 people became the fifth U.S. community to enter bankruptcy this year. In 2010, six cities filed for Chapter 9 bankruptcy protection.
The bankruptcy actions of municipalities demonstrate there is no shame in filing for bankruptcy. The reality of bankruptcy is that it is a legal tool that allows petitioners to reorganize their financial lives, and without much pressure from creditors. Don’t let an emotion get in the way of what is purely a business decision.
Benjamin Brand Services – Chicago bankruptcy lawyer