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California's Debt & IOUs - What a Mess - How to Protect Your California Investments with Put Options | PowerOptions Web Log
The state of California is in financial distress. Unlike its municipalities, California cannot seek protection under the United States Bankruptcy Code (“Bankruptcy Code”). The state will have to address the crisis through a range of non-bankruptcy options. State issued IOUs will have to be paid. Contractors may be amenable to renegotiating their contracts. Perhaps the arrival of “stimulus package” funds will alleviate some distress. Debt will be reduced by agreement, in some cases, and refinanced or extended in others. Bankruptcy issues are determined by the Bankruptcy Code and federal court opinions interpreting the Code. Bankruptcy is not an option for the state of California because the Bankruptcy Code does not allow for a state filing. Chapter 9 of the Bankruptcy Code allows a municipal corporation to adjust its debts under the protection of the United States Bankruptcy Court so long as the filing is authorized by the state where the...