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Deep School Cuts Likely to Lead to More Teacher Bankruptcies

June 21, 2012

If you have one financially failing California school district, multiplied by 27, how many teacher bankruptcies will that equal? chalkboard.jpg

With our school districts in precarious financial straits, we are likely to see a growing number of school employees filing for bankruptcy in Orange County and elsewhere.

Orange County Bankruptcy Attorney Vincent Howard has been closely following the developments regarding the viability of some of these districts, and deep cuts are going to mean pay cuts, slashed pensions and lay-offs. All of these can contribute to ballooning debt. Even if these employees and former employees are able to stay financially afloat, they may be one illness or injury away from teetering over the edge.

Fortunately, a Chapter 7 bankruptcy, which allows you to establish a fresh start from this debt, may provide these workers with the stability they need.

According to The Los Angeles Times, a record number of school district are right now facing down bankruptcy. In fact, there are 12 districts in all. Most of those are in northern California, but there are a few in the southern region.

What's more, another approximately 180 schools have reported they will be unable to meet all of their financial obligations for the next school year.

The situation will be far more wide-reaching if a statewide school tax initiative doesn't pass this fall. Problem is, with everyone else facing financial problems of their own, nobody is inclined to further raise any taxes.

Those financially troubled districts in total serve more than 2.5 million pupils.

Officials in the education sector say that the state government has slashed its budget by 20 percent in the last three years, greatly contributing the woes currently being faced. Throughout the entire state, some 27 school districts, including L.A. Unified, say they don't have enough money to pay their bills next year.

Some school districts are already negotiating pay cuts for teachers and other school employees.

When teachers file for bankruptcy, Attorney Vincent Howard understands there are some unique considerations. For example, just by virtue of the way their pay is staggered, receiving checks for just nine months out of the year, is one complication to the proceeding. (For example, a means test of your income calculates the paycheck you've received for the last six months; so if you file in March, this test won't accurately reflect your income. In some cases, it can be beneficial to wait to file until September.)

Then you also have ongoing payroll changes that have resulted in the district taking action to collect certain overpayment errors. In other cases, teachers are battling underpayment errors. There are also varying calculations of overtime, such as tenthly rate or Z-Time, not to mention factoring in furloughs and other aspects, such as issues relating to certain STRS accounts in which teachers aren't paying into social security.

Some news outlets have insinuated that bankruptcies were a way for school districts to break free of their union contracts with teachers. We tend to believe that these schools really are in trouble, but either way, teachers and other employees are going to suffer.

Orange County Bankruptcy Attorney Vincent Howard at Howard Law can help. You can reach us toll-free at 1-800-872-5925 or send us a message online.

Additional Resources:
Record number of school districts in state face bankruptcy, By Teresa Watanabe, The Los Angeles Times

More Blog Entries:
Los Angeles Bankruptcy Attorneys: Rebuild Credit After Bankruptcy, May 29, 2012, Orange County Bankruptcy Lawyer Blog