A federal judge ruled on Friday that Detroit’s request to table three lawsuits filed by Ingham County creditors was valid, thus pushing aside a major roadblock in the city’s Chapter 9 bankruptcy case. This ruling overrode a previous ruling, which declared that Michigan Governor Rick Snyder had “trampled the Michigan Constitution,” and acted illegally when he approved the filing.
Bankruptcy Attorneys Argue Successfully for Detroit
Bankruptcy attorneys for the city had lobbied the judge to dismiss the state lawsuits, noting that it could result in irreparable harm to the city’s restructuring program, if the city should have to deal simultaneously with the lawsuits. Under the Chapter 9 filing, Detroit must devise a plan for the restructuring and scheduled repayment of its $18 billion debt, a debt that is spread among thousands of separate creditors.
The city’s bankruptcy case is almost too complex to comprehend, with myriad angles and countless individual points of view to take in. For example, there are the 21,000 retirees – former city employees – who may or may not receive their pensions under the restructuring. The Michigan Constitution nominally protects those pensions, but there is no federal insurance should the pensions be broken.
Kevyn Orr, the expert bankruptcy lawyer in charge of the Detroit case, is faced with the mammoth task of restructuring a payment plan including this and the thousands of other debts the city faces. No one knows for certain what the ultimate results of the Chapter 9 filing will be, such as whether Detroit will be forced to liquidate assets and how many might be sold.