The trial for bankruptcy eligibility for the City of Detroit will proceed today. The United States Bankruptcy Court for the Eastern District of Michigan will again hold hearings in the trial.
The trial is a requirement in all Chapter 9 bankruptcy filings to show that the governmental entity is eligible for protection under the bankruptcy code. Personal bankruptcy filers under Chapters 7 and 13 of the bankruptcy code have no such requirement to show proof at trial.
Bankruptcy Trustees and Creditors are allowed to object to bankruptcy filings for varying reasons, however, it is rare that an individual does not qualify under the bankruptcy code.
The bankruptcy court will today continue to hear on whether the City of Detroit negotiated in good faith with its creditors and reached an impasse, or whether the plan all along was to file bankruptcy for Detroit.
Channel 7 WXYZ Detroit has more coverage on the bankruptcy trial.
DETROIT (WXYZ) – Detroit’s historic bankruptcy eligibility trial continues this week with a shift in who is presenting evidence to Judge Steven Rhodes.
The burden of proof that Detroit is eligible is on the city and the final witness, Emergency Manager Kevyn Orr will finish his testimony today. Orr was asked this morning about documents obtained in the case from objectors.
The questions? If Detroit’s bankruptcy was the plan from the beginning, if Orr was in the loop with the Governor and his team as early as February 13 and if the Jones Day law firm, for which he worked, called the Detroit case “DEBTWA NEWS” – a play on the debt and the Detroit News.
Orr was also questioned about negotiating with the four Detroit public safety unions in good faith on July 12 without any specific proposals just days before filing for bankruptcy.
Another email, not seen publicly before todaym from Rich Baird, an aide to the Governor to Orr on February 22 said to Orr, that he was “already behaving as an agent of the state.” Orr testified that was “salesmanship and puffing” from Baird and not based on a “legal conclusion.”
Baird is expected to testify this week under subpoena from objectors.
No one is disputing Detroit’s $18 billion debt. At issue? Is the bankruptcy constitutional with the Emergency Manager Law that was repealed by voters in November of 2012 and replaced by the legislature and Governor in December.
Also whether the Michigan Constitution protects 20,000 Detroit city employee pensions from being cut in bankruptcy.
Pension underfunding is set at $3.5 billion. Some legal experts believe that issue alone could become a long appeal in the federal court system.
The city must also prove it attempted to negotiate with creditors in good faith before going into bankruptcy.
One of the first witnesses up for objectors to bankruptcy will be Detroit Police Officers Association President Mark Diaz who is expected to testify there were presentations with numbers but no talks.
WXYZ Channel 7 News: http://www.wxyz.com/dpp/news/state/Detroit-bankruptcy-trial-enters-6th-day-in-federal-court
