The showdown between Central Falls and its workers has continued into 2011. This time negotiations break down between the city and police and fire unions. When Central Falls ran out of options, they decided that filing Chapter 9 was the only option. Here’s the breakdown without the filing.

Central Falls: $5.6m Deficit

• $22m in expenses
• $16.4m projected revenue
• City services reduced to minimal levels
• Taxes increased to maximum levels

An incident earlier in the year in Idaho first drew national attention. Idaho’s Boise County filed for Chapter 9 protection after it had been determined that the county had violated federal law. The result was the county needed to pay $6.2m to a developer. Central Falls is facing a similar shortage. It is expecting a $5.6m deficit by next June.

A municipality to declaring bankruptcy seems to be an isolated incident, but it’s not. Locally in Georgia several counties have faced the risk of bankruptcy because they were unable to collect taxes on homes in default, including going through a bankruptcy procedure. This can also impact the cash flow of a municipality, which in turn can limit its ability to pay for services and obligations.

When a community declares Chapter 9 it distresses everyone. The value of the community decreases and as illustrated in Central Falls, the taxes that the community ends up seeking can go up, further hurting the buying power and ability to pay personal debt that many Central Falls residents are facing. The expected result can be a trickledown effect with and increased demand for people looking to file for Chapter 13 bankruptcy and Chapter 7 bankruptcy.

Once the homeowner is in the trial modification, they must stay current on their new mortgage payment for three months they can apply to turn the trial into a permanent modification.

A story about the issue in the Wall Street Journal, one mortgage servicing company in has 39,000 borrowers who are up to date on their trial payments, but only around 500 have received permanent modifications. It almost seems the pace is slower than getting the modification in the first place.

My guess is that many of these homeowners are facing collection calls and foreclosure notices waiting to get a trial modification on their mortgage.

I don’t think that bankruptcy would be right for all of these homeowners fighting to keep their homes, but it could be a solution that is much quicker and easier than this drawn out process that has no guarantee of success.

Filing bankruptcy will stop foreclosure on your home. It will clear some of your debts and might help to free up some income that could then be used to make the payments on your home.

Bankruptcy may sound like a drastic step, and it may be. But it helps to stop creditors from harassing you for payments you can’t make. It can give you the help you need to start your life fresh, free of the obligations that have you trapped in a downward spiral.

The bill requires credit card issuers to give 45 days notice before changing interest rates on an account. It also prohibits companies from raising the interest rate on existing balances unless the card holder is  at least 60 days behind on minimum payments.

The measure aslo includes an unrelated amendment that will allow loaded handguns and rifles to be taken into national parks and preserves.

It brings to mind the promises that were made for bankruptcy reforms that would allow a judge to modify a first mortgage in a Chapter 13 bankruptcy case. Does Congress think that the credit card reforms will be enough to slow the growing foreclosure rates and protect homeowners from eviction?