As local budgets across the US are upended during the coronavirus pandemic, the city of Fairfield, Alabama, filed for Chapter 9 bankruptcy protection on Tuesday. The northern district of Alabama listed liabilities of $10m while making the filing in the US Bankruptcy Court.

After working for years to maintain its finances, Fairfield exhausted its options, Mayor Eddie J Penny noted while signing the bankruptcy resolution. "The city has faced a substantial decline in revenues in recent years due to economic forces beyond its control," the resolution reads.

The shutdown of the city in order to curb the spread of the virus worsened its financial problems. The city has between 200 and 999 creditors with the largest creditor listed as US Bank with an $18m unsecured claim.

Penny said no city worker will be laid off. City services like police and fire department, sanitation and city schools will remain unaffected, AL.com reported.

What Does Resolution Say?

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The resolution clearly states that while the bankruptcy process proceeds, the city will keep up its obligations to current workers for their wages and salaries, including earned vacations and paid leave. It will also honor "pre-petition and post-petition continuing obligations to trade vendors that have provided and continue to provide goods and services to the City in the ordinary course of business and according to the credit terms agreed to by such vendors and the City."

The majority of population in Fairfield belongs to the African-American community with around 11,000 residents about eight miles from Birmingham. According to the US Census Bureau, about 20 per cent of citizens live in poverty. The city falls under Jefferson County which filed for the largest municipal bankruptcy in US history in 2011.

Jefferson County was facing $4.23b in debt and running short of cash. Wall Street banks gave loans and refinanced the debt.