U.S. federal judge on Wednesday approved bankruptcy protection in the city of San Bernardino , California , the battle between bondholders and California 's giant public pension system , paving the way set a precedent .
The case is being closely watched other U.S. cities, including Detroit , announced last month , the nation's largest municipal bankruptcy budgetary burden pension costs soared.
United States Bankruptcy Court for the Central District of California Judge Meredith jury in San Bernardino despite opposition by the California Public Employees ' Retirement System , or a retirement fund for Chapter 9 bankruptcy protection. $ $ 26 billion pension fund is the city's largest creditor , the largest U.S. pension fund .
" I, as a matter of law , the city is eligible conversion, " the judges said. "I do not think anyone in this court seriously think the city is anything but insolvent ."
A city must be insolvent , there is evidence of good faith negotiations with creditors for Chapter 9 municipal bankruptcy.
Michael leverage ratio, the emergence of a lawyer Calpers, said the jury's decision was " dangerous precedent " that will encourage other cities " create a crisis , because they have a large number of creditors ."
Amy Norris , pension fund spokesman said in an emailed statement, said: "The pension fund is considering its options for appeal ."
San Bernardino , 210,000 of the city, located 60 miles east of Los Angeles , in August 2012 filed for bankruptcy protection , citing $ 46 million deficit , and that it has the effective operation of cash to meet their daily obligations.
City must negotiate with the creditors , and produce a final bankruptcy plan , the judge will eventually rule. Both pensions and other debt , including $ 50 million of pension obligations bond holders will have to be treated equally or not, will remain a key issue - one could eventually reach the U.S. Supreme Court.
Like other creditors ?
Pension funds that should not be treated like other creditors must be paid in full , because California law that the Fund must always be paid , even in bankruptcy. Bondholders that federal bankruptcy law is better than national laws and regulations , and said , pension funds and other creditors should pay how much they were forced to fight under the exit plan .
Another California City , Stockton , which is in the municipal bankruptcy protection in April , is expected to leave the scheme proposed in September . Creditors will be asked to vote on the plan .
Supervision of this case, the judge said , exit plan , the processing and Stockton obligations , pension funds will likely be unavoidable.
In an unprecedented move, the San Bernardino stop paying its 12,000 paid by the employer to the pension fund bimonthly year after the declaration of bankruptcy , the first city in California to stop paying funds.
Resume payment of retirement funds last month , but continues to violate other creditors, including $ 50 million of pension obligation bonds Holder.
Pension fund , said the city still owes the fund $ 14.3 million debt it will "actively pursue all past due contributions , accrued interest and penalties ."
" These payments are statutory requirements, the need to provide pension benefits promised , San Bernardino employees as deferred compensation in the form , " a strong pension system .
But the judge questioned they will provide these payments .
"If pension funds to get all the money they want , what they say is their legal right , is not going to get paid ? All employees ? Next thing is to help the pension fund do ? " She said.
At present , the case in 12-BK-28006, heavy Bernardino , United States Bankruptcy Court , Central District of California ( Riverside ) .



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