An Arizona fire district that provided fire and EMS coverage to approximately 2,500 square miles, including several Navajo Nation communities, has filed for Chapter 9 bankruptcy protection after closing its station, laying off its employees, and stopping emergency response operations.

The Puerco Valley Fire District’s closure leaves at least four communities without their usual fire and medical coverage. Navajo Nation Fire & Rescue, the Navajo Police Department, and the Navajo Nation EMS Incident Response Team began covering calls in the affected area on July 24, 2026, with residents warned to expect longer response times.

Six days after the district closed, it filed for bankruptcy.

The case raises an uncommon fire-service question: Can a fire district use bankruptcy to protect itself from creditors, and restructure its debts? The answer is yes, because federal bankruptcy law extends Chapter 9 to qualifying governmental entities, including special taxing districts.  We covered that issue several years ago.

The Puerco Valley Fire District filed its voluntary petition today, July 30, 2026, in the US Bankruptcy Court for the District of Arizona. Puerco Valley identifies itself in the petition as a special taxing district with a principal place of business in Sanders, Arizona. The petition lists Puerco Valley Ambulance Service as another name used by the district.

The district estimates that it has between one and 49 creditors, assets between $500,001 and $1 million, and liabilities between $1 million and $10 million. It reported that funds will be available for distribution to unsecured creditors.

According to 12News, the Navajo Nation Division of Public Safety reported that the district closed its doors and stopped providing fire and medical services to several Navajo Nation communities. District employees were reportedly sent layoff notices. The affected communities include Nahata Dziil, Wide Ruins, Houck and Tse’ Si Ani.

Navajo Nation Fire & Rescue coordinated with the Navajo Police Department to route fire-related calls to Navajo Nation resources. The Navajo Nation EMS Incident Response Team was assigned to support responses, and additional personnel and resources were activated at the Navajo Police Department’s Sanders substation.

The district’s financial problems had been discussed publicly for several months. During a January 2026 meeting of the Apache County Board of Supervisors, James Watchman Jr., president of the Navajo Nation’s Houck Chapter, told supervisors that the district lacked funding to pay its personnel. Navajo Nation Council Delegate Arbin Mitchell asked the county to assist the Puerco Valley and Ganado fire districts with funding that he said had been frozen.

Michael Halliwell, community service coordinator for the Wide Ruins Chapter, told the supervisors that closing the district would “drastically affect the area.” Representatives from the Navajo Nation Office of the President also attended the meeting to discuss the district’s financial problems and their effect on communities within its service area.

According to the US Courts web site:

• The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.

Chapter 9 is not limited to incorporated cities and towns. Taxing districts and other special-purpose governmental districts can qualify. Federal law also requires the entity to be specifically authorized to file under state law, be insolvent, desire to adjust its debts, and meet one of several statutory requirements concerning negotiations with creditors.

Arizona provides the required state authorization. Arizona Revised Statutes § 35-603 states:

• Any taxing district in this state is authorized to file the petition provided for in the federal bankruptcy statute and to incur and pay the expenses thereof and any and all other expenses necessary or incidental to the consummation of the plan of readjustment contemplated in such petition or as it may be modified from time to time.

Arizona law also requires the taxing district to adopt a resolution authorizing the filing and its representation by an attorney before the petition is filed.

Here is a copy of the petition: