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Alabama County Files Largest Chapter 9 Bankruptcy in History

November 11, 2011

Recently the commissioners of Jefferson County, Alabama, voted to file the largest Chapter 9 bankruptcy in history. The New York Times reports that the county is “roughly $4 billion” in debt. Jefferson County’s financial trouble stems from poor attempts to finance the court-ordered rebuilding of its out of date sewer system. Jefferson County is Alabama’s most populous county and home to the city of Birmingham.

The size of Jefferson County’s bankruptcy debt is staggering, and surpasses the previous record for largest Chapter 9 bankruptcy set by Orange County, Calif., in December 1994. Orange County listed $1.7 billion in debt. However, Jefferson County’s debt does not set the record for most debt in a bankruptcy case. It’s not even close.

When Enron filed for Chapter 11 in 2001, the company’s total debt was $31.2 billion. Worldcom, Inc. filed bankruptcy in 2002 and listed $41 billion in debt. But the grand daddy of them all is Lehman Brothers Holdings, who in 2008 filed Chapter 11 bankruptcy listing a whopping $613 billion in debt. Of course, much of this debt can be off-set against company assets, but consider that Lehman Brothers is still trying to gain approval for a plan to repay $65 billion to creditors.

No matter the size of your debt load, the bankruptcy code can offer you relief. There are no debt limits for a Chapter 7 bankruptcy case, which discharges personal debts without repayment. The Bankruptcy Code streamlines the reorganization process for individuals, but limits Chapter 13 eligibility to total unsecured debts less than $360,475, and total secured debts less than $1,081,400. If you exceed these limits, then your individual bankruptcy case can be filed under Chapter 11.

If you have debts that you cannot afford to repay, seek out assistance from an experienced bankruptcy attorney. The federal bankruptcy laws can help you restructure your finances, discharge burdensome debt, and provide you with a fresh financial beginning.


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