The New Haven entered bankruptcy in 1935; the next year, it ended the 1893 lease of the unprofitable Old Colony Division, but continued operating those lines by court order.
The Old Colony and New Haven closed 88 stations in Massachusetts (plus five in Rhode Island) on July 18, 1938, ending passenger service altogether on some lines.
State agencies, such as the Massachusetts Public Utilities Commission (PUC), had more regulatory power over intrastate service.
[2]: 497 Prior to 1933, railroad reorganizations rarely had negative effects on users (passengers and freight shippers), as receivership typically involved a deferment of debts rather than cuts to service.
[3] Major amendments on August 27, 1935, attempted to streamline the bankruptcy process, as the complexity of railroads had resulted in protracted proceedings.
[4] The Depression and automobile competition made increasing revenues near-impossible, while the Railway Labor Act disallowed wage reductions.
Since only major corridors tended to be profitable, lesser-used lines and stations were increasingly targeted for elimination during bankruptcy proceedings.
[2]: 499 The public largely saw the proceedings as a chance for the New Haven to escape its early-20th-century debt; Old Colony stock rose from 39 to 70 by March 1936.
The trustees produced a formula to segregate the earnings and costs of the Old Colony to establish charges for continued operation.
[11] On June 20, 1938, the trustees and a bondholders committee petitioned the court to allow closure of the 93 stations regardless of the PUC outcome.
On July 7, Judge Carroll C. Hincks issued an order allowing the railroad to close the stations; the PUC appealed, and the state formed a legislative committee to investigate the matter.
On January 16, 1939, the court ruled 2–1 in Converse v. Massachusetts that Hincks had exceeded his jurisdiction by issuing the order closing the 88 stations.
After hearings, the PUC ruled on February 21, 1940, that the railroad must restore service to 32 of the 88 stations, with the remaining 56 allowed to permanently close.
[2]: 501 On May 31, 1939, with Palmer v. Massachusetts pending, the Old Colony filed an amended reorganization plan calling for the abandonment of all passenger service in the "Boston Group" – the primary group of lines into Boston, including the Greenbush, Plymouth, and Middleborough lines and the shared mainline north of Braintree.
[25][2]: 502 On June 14, the ICC unexpectedly announced that the proposed abandonment would not be considered as part of the ongoing reorganization, but would instead require separate proceedings.
[28] In November 1939, the trustees filed with the ICC to outright abandon freight and passenger service on the entire Boston Group.
[29][30][31] Under a December deal between the New Haven and a legislative commission, Boston Group service was reduced from 121 to about 80 daily trips effective January 7.
[36]: 12 (Passenger service on one short line in the Boston Group, the West Quincy Branch, was separately discontinued by PUC approval in September 1940.
Provincetown service ended after the 1940 summer season, and three stations (Forest Hills, Boylston Street, and Jamaica Plain) also closed that year.
[38] The New Haven emerged from bankruptcy on September 11, 1947, and fully acquired the Old Colony a week later; the B&P was kept as a separate New Haven-owned company.
[41]: 862 Losses on the Old Colony reached the critical value in October 1948; after threatening to discontinue all service, the New Haven cut back to a 26-train peak-only schedule on the Boston Group in March 1949.
[38][1]: 13, 96 Under the 1951–1954 presidency of Frederic C. Dumaine Jr., the New Haven increased passenger service, using new Budd Rail Diesel Cars to reduce costs.
Service on the Dorchester Branch began in 1979 as a temporary bypass during Southwest Corridor construction (at which time Mount Hope station was closed).