(Reuters) - A unit of insurer MBIA Inc challenged Stockton, Calif.'s eligibility for bankruptcy, saying the city's decision not to ask for concessions from the California Public Employees' Retirement System pension fund undermined its case.
The filing in bankruptcy court sets up a battle between creditors and the city which could determine whether Stockton is allowed court protection and could set precedent over whether and how cities, counties and the state can cut retirement benefits.
A federal judge must approve Stockton's eligibility for Chapter 9 protection before the city can reorganize its debts under court protection from creditors, and a primary criterion is whether the bankruptcy petition was filed in good faith.
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