Vallejo committee asks court to set plan deadline or dismiss case

By Caroline Salls

Pittsburgh, Sept. 25 - The City of Vallejo, Calif.'s official committee of unsecured creditors has asked the U.S. Bankruptcy Court for the Eastern District of California to set a Nov. 30 deadline for the city to file a plan of adjustment, according to a Thursday court filing.

In addition, the committee asked the court to schedule a status conference for the week of Dec. 7 and, if the plan has not been filed by then or appears to be unconfirmable, to dismiss Vallejo's Chapter 9 bankruptcy case.

According to the motion, the city has been operating under a pendency plan since July 1, 2008 with the goal of reducing costs to what Vallejo could afford.

The committee said the city accomplishes this cost reduction by breaching some contracts and obligations at its own discretion while continuing to pay others "as if nothing were amiss."

"The city pays some creditors fully, some partially, and some are paid nothing - all as determined in the city's sole discretion," the committee said in its motion.

The committee said case dismissal is the only remedy for a Chapter 9 debtor that fails to progress, and the city "does what it wishes during Chapter 9."

"For the past 15 months, the city has used state law when convenient, then claimed federal preemption when convenient - and always contending that this court has no ability to interfere in its operations," the committee said.

A hearing is scheduled for Oct. 26.

Vallejo filed for bankruptcy on May 23, 2008. Its Chapter 9 case number is 08-26813.

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