Moral bankruptcy leading case ...

Stockton’s Moral Deficit

Steven Greenhut

A creditor argues that the California city’s bankruptcy is a sham.

Suppose you go on a spending spree, purchasing luxury items on credit such as a vacation home and new cars. 

• Part of you knows the good times won’t last forever. 
• Nevertheless, you decide to buy things you can’t afford, convincing yourself that you need and deserve them. 
• In the process, you make some investments that don’t pan out. 
• When ends don’t meet, you go to the bank and take out loans to pay off your older balances. 
• Now deep in a financial hole, you hit upon a plan to climb out: simply default on your new loans by declaring bankruptcy and propose that the court let you do so without selling off most of those new toys you bought.

This is essentially the path taken over the past decade by the northern California city of Stockton, which filed for Chapter 9 bankruptcy protection last June. 

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