SACRAMENTO, Calif. (Reuters) – The U.S. judge hearing the bankruptcy case of Stockton, California ruled on Wednesday the city does not need court approval to settle a $55,000 claim, a plan contested by capital market creditors and backed by the state's pension fund.

Chief Bankruptcy Judge Christopher Klein said the federal Chapter 9 municipal bankruptcy code does not allow courts to tell cities seeking protection from their creditors how to use their property and revenues.

Klein said Stockton maintains financial independence, which includes opting to pay to settle a claim against its police department, a blow to creditors seeking his help to influence the broke city's financial choices.

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