An assortment of United States coins, includin...

Most don’t imagine that it can happen to them…a city files bankruptcy and/or stops making payments on their pension obligations right before filing bankruptcy.  It may not sound like a probability; but it is happening and many seniors are finding themselves considering their own personal bankruptcy filings to help soften the blow.

Let’s take a look at the town of Prichard, Alabama:

The financially troubled suburb of Mobile turned to bankruptcy court in October 2009 when it “simply ran of money to pay its pension obligations,” says the city’s lawyer R. Scott Williams.

Prichard proposed capping benefits to current retirees at about $200 a month, down from monthly payments of as much as $3,000. “That’s not a haircut, that’s a scalping,” said Larry Voit, who represented a group of 40 retired city workers in Prichard, population 27,500.

Though bankruptcy law remains murky on how far a city or town can go in scrapping deals for current retirees, cases like Prichard and other workout efforts stand to reshape the debate over how local governments deal with mounting public-pension problems.

As the ripple effect of the recession and housing crisis take hold of cities nationwide, big and small, how will this impact many of the seniors dependent upon the income that these pensions provide?  When we’re looking at cutbacks that reduce retirement income from $3,000 a month to only $200 a month, we may be looking at more seniors facing foreclosure , credit card defaults and even destitution if they heavily depended on that pension income for their livelihood.  Many of them faced with the prospect of losing all they worked for may choose to discharge their debts in bankruptcy.