The final decision for Stockton, California's bankruptcy case has been left uncertain on Wednesday as the final ruling was moved to the end of October, in accordance with the order of the judge presiding over the case. Christopher Klein, a judge for U.S. Bankruptcy, also stated that he is not in the position to make any decision as of the moment.

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With the city's contract between the ruling of California Public Employee Retirement System (CalPERS), Klein announced that there is a possibility that the world's biggest pension fund would be refused-a statement that shocked the courtroom earlier that day.

This ruling is somewhat similar to the bankruptcy case of Detroit, where the judge also decided that pensions would most likely absorb losses amongst other creditors. Detroit's pension plans agreed to take benefit reductions instead, but the issue of bankruptcy remained unresolved. On the other hand, CalPERS disagreed with the judge's decision.

Klein's ruling was questioned by Harvey Leiderman of the Reed Smith law firm. Leiderman said that they keep their city's people "off-ramp" whenever they couldn't keep their promises to their employees. He cited that the municipalities would be able to refuse to provide services to their citizens if they are given the option to walk away from the statutory responsibilities such as affording benefits to their pensioners.

Of course, the city of Stockton disagrees with the decrease in employee's pensions due to the fear of having a termination fee reaching $1.6B to CalPERS. Hence, Klein added that the fee could be disregarded while in the process of determining bankruptcy. This also worries the city officials of Stockton, especially due to the fact that the restructured plan would involve about 60 percent of the benefit reductions causing city workers, even firefighters and policemen, to resign.

Stockton is considered as the biggest city in the U.S. to ever seek the protection provided by Chapter 9 before Detroit filed for bankruptcy in 2013.  Under Chapter 9 protection, state and local governments, public employees, and bondholders would want to fully explain to Wall Street how cities that are financially distressed overcome and handle their debts.

The bankruptcy case for Stockton is merely focusing on the creditor's collateral hold ups, which are managed by Franklin Templeton Investments. With respect this aspect, the judge ruled their collateral to be worth $4.1M. At present, Franklin is arguing about pensions that are supposed to be intact even during the process of bankruptcy, which include other creditors and their losses.

Tagsstockton, bankruptcy, CalPERS, pernsion, payment reduction