Hillview, Kentucky, which has filed for Chapter 9 bankruptcy, is in negotiations with its largest creditor.

BRADENTON, Fla. – Hillview, Ky., and the creditor the city says forced it into bankruptcy have entered into mediation.

U.S. Bankruptcy Judge Alan C. Stout on Tuesday continued a status hearing on the bankruptcy case until Feb. 9, giving attorneys representing the small city and the firm Truck America time to meet again on a potential settlement.

Court records had indicated that Stout might rule this month as to whether Hillview is eligible to proceed with its Chapter 9 petition.

Hillview has said that it filed for bankruptcy to stop interest from accruing on an $11.4 million breach of contract judgment won by Truck America in 2012. The city unsuccessfully appealed the judgment.

At the time Hillview filed its petition on Aug. 20, the city said the judgment, with 12% interest compounding annually, had grown to $14.7 million.

Truck America said the mediator earlier this month discovered that the amount Hillview owes is higher.

The city owes $15.23 million because the "mediator identified a computational error" in the way interest was calculated, Truck America attorney Brian Meldrum said in a letter filed with the court on Monday.

The payoff would rise to $16.05 million by Feb. 1, which the company said it would seek if Stout determines that Hillview is not eligible for bankruptcy.

Meldrum has asked the city to correct the math error.

Hillview ended fiscal 2015 with a general fund balance of $1.14 million and an unassigned fund balance of $542,739 as of June 30, according to the city’s draft financial statement filed by the Kentucky Bond Corp. on the Municipal Securities Rulemaking Board’s EMMA filing system.

The city also owed a combined $2.02 million on a pool bond issued by the Kentucky Bond Corp., and on outstanding general obligation bonds.

Last year, Truck America had offered to take $6 million to settle the judgment, and suggested that the city pay a most of the debt by issuing bonds. The city rejected the offer.

Hillview is located just south of Louisville, and has 9,000 residents.

Kentucky Rep. Brad Montell, R-Shelbyville, said the city's petition and other high-profile Chapter 9 cases prompted him to ask for a study of other state's municipal bankruptcy laws and oversight programs designed to assist local governments in fiscal distress.

The Legislature has not acted on his request.

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