Can a Volunteer Fire Company File for Bankruptcy?

Volunteers make up for 73 percent of firefighters in the United States, according to the National Volunteer Fire Council. Volunteer fire departments are nonprofit corporations. They utilize funds from private sources such as donors or county or state funding. Like any corporation, volunteer companies have expenses. They may rely on credit facilities and sometimes more money is borrowed than can be paid back. This leads to insolvency and, possibly, bankruptcy.

Legal Perspective

Section 109 of Title 11 of the U.S. Code makes provision for who qualifies to be a debtor in a bankruptcy case. It states that a person who lives or has a place of business or property in the United States may be a debtor. “Person” is defined as an individual, partnership or corporation. Volunteer fire companies fall under this definition and can therefore file for bankruptcy.

Examples

The Hour of Stamford, Connecticut reported in March 2009 on the number of voluntary fire departments that had run into bankruptcy. Glenbrook Fire Department was the only one in Stamford at the time that had not faced insolvency. The Pittsburgh Post-Gazette's website reported the Baggaley Volunteer Fire Department had planned to file for bankruptcy with a debt of $ 241,000. These examples indicate it's possible for volunteer fire departments to file for bankruptcy.

Representation

The volunteer fire department files for bankruptcy through an attorney. He assists the department in paying court fees for the filing of the proceedings. The fee is mandatory; therefore, the department finds a way to raise it even if is insolvent. Assistance of a tax administrator is required. The tax administrator files income tax for the department when the court approves restructuring.

Restructuring

The volunteer fire department retains its assets in a bankruptcy filing and makes arrangements to pay its creditors. The court may appoint a trustee to oversee the department; if not, the department acts as a trustee. Being a non-profit organization the department finds means to pay its debts or risk bankruptcy.

References

• Vfd-Resources: National Volunteer Fire Council: Fact Sheet
• Cornell University Law School: Legal Information Institute: Who May Be a Debtor?
• The Hour: Bankruptcy Looms for Volunteer Fire Companies’; Chase Wright; March 2009
• Post-gazette.com; PG News; Debt Shuts Volunteer Company; Marylynne Pitz; July 2001