First bankruptcy hearing on Thursday

Thursday in US Bankruptcy Court in Sacramento before Judge Thomas C. Holman, lawyers for the Town of Mammoth Lakes will present three motions – all of which call for scheduling hearings and other details related to the municipal bankruptcy process.

At 1:30 on Thursday, Judge Holman will consider the Town’s motions. One of them calls for an order setting an Eligibility Hearing. According to the Bankruptcy Court website, to be eligible for bankruptcy, a municipality must be insolvent, according to legal code; must be authorized to be a debtor; must desire a plan to deal with its debts; and must get an agreement from majority creditors, negotiate in good faith or show why this could not happen.

The Court website also says, “Chapter 9 of the Bankruptcy Code provides a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Although similar in some respects to other chapters of the Bankruptcy Code, it is significantly different in that there is no provision for liquidation of the assets of the municipality and distribution of the proceeds to creditors.” The Town of Mammoth has offered up its two Town-owned condominiums but no other properties.

Bankruptcy Law says that objections to petitions for bankruptcy may be filed with the Court. According to the Bankruptcy Court website, “typically objections concern issues like whether negotiations have been conducted in good faith….” Mammoth Lakes Land Acquisition’s lawyer, Dan Brockett, stated that MLLA does intend to fight Mammoth’s bid for bankruptcy. He alleged bad faith on the part of the Town and a lack of insolvency.

In addition to a Chapter 9 Petition, the Town also filed a list of creditors, a Statement of Qualifications (to file for bankruptcy) and other documents. The Town’s Notice of Hearing says that filing a petition puts a hold on all attempts to collect or recover claims. The same document says that “The primary purpose of Chapter 9 is to allow the municipality to continue its operations and its provision of services while it restructures creditor obligations.” The filing also says the Bankruptcy Court may not interfere with any of the political or governmental powers of the Town.

The July 5th Notice of Hearing was signed by attorneys of Fulbright & Jaworski and attorneys from the firm of Klee, Tuchin, Bogdanoff & Stern. The Town of Mammoth has posted a Chapter 9 Bankruptcy link on its website with more information. Go to

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