SACRAMENTO, April 1 Stockton, California, was
ruled eligible for bankruptcy protection under Chapter 9 of the
U.S. bankruptcy code, a U.S. judged said on Monday, turning
aside creditors' arguments that the city was not truly insolvent
when it sought protection last year and had improperly failed to
In a case that has been widely watched by the $3.7 trillion
municipal bond market, U.S. Bankruptcy Judge Christopher Klein
said Stockton had established during last week's three-day trial
that it had met requirements to be found eligible to proceed
with its municipal bankruptcy case.
Officials in the city of nearly 300,000, the largest city so
far to have filed for municipal bankruptcy, will now be allowed
to start drafting a so-called plan of adjustment for the city's
The case is expected to pit municipal bondholders against
the California Public Employee Retirement System, which manages
pensions for Stockton and many other California governments.