The City of Detroit’s Chapter 9 bankruptcy should have a final determination made by the Bankruptcy Court for Eastern District of Michigan by the 7th of November.
Bankruptcy attorneys and bankruptcy creditors have already made their final arguments to the court. The Court advised bankruptcy lawyers that he will have a final ruling on Detroit’s bankruptcy by the end of this week.
Bankruptcy lawyers for all sides will need to take stock of the decision as all parties have invested a great deal of time to resolve issues. In the event the bankruptcy is denied, default could occur which will leave most creditors in a much worse position than had the case been approved.
In consumer bankruptcy, approval is much more limited and less costly. Chapter 7 bankruptcies involve a filing by a bankruptcy debtor in court. The debtor and his/her bankruptcy attorney are required to appear for a first meeting of creditors where any party in interest can question the debtor about his/her finances. The Trustee (individual overseeing the case on behalf of the court and creditors) and creditors have 60 days to object. In the event no objections are filed, the case is granted and discharge entered.
In a Chapter 13 bankruptcy, which repays creditors over time. The debtor and his/her bankruptcy lawyer will also attend a first meeting of creditors. Objections moving forward are much more likely in this chapter, but can normally be resolved fairly easily. If all issues are resolved, the case will be “confirmed” at the next hearing called a confirmation hearing. At that time, the clock for plan length.
For more on the ending of the case, please see The Detroit News’ article.
Detroit — The city’s historic bankruptcy trial wrapped up Monday after lawyers made their final case for approval of a debt-cutting plan they say will be a blueprint for Detroit’s revitalization.
U.S. Bankruptcy Judge Steven Rhodes said he will deliver his decision on whether to approve or reject the city’s plan in court on Nov. 7.
Closing arguments gave the city and lawyers for supporting creditors one last chance to convince Rhodes to approve the plan that would shed more than $7 billion in debt and free up money for improved city services.
Rhodes took a final opportunity to press lawyers about the feasibility of the plan, asking city lawyer Bruce Bennett to identify the top risks that could prevent Detroit from implementing the debt-cutting plan. Bennett admitted the strategy could fall apart if Detroit leaders deviate from a plan to invest $1.7 billion or waste the money though there are numerous protections and levels of oversight.
“The worst thing that could happen is if the $1.7 billion is misused or perceived to be misused,” Bennett told the judge. “Either would be an enormous problem.”
Bennett also looked ahead, admitting that he hopes Detroit can start implementing its debt-cutting plan before Thanksgiving.
There were pockets of individual objectors Monday.
City retiree John Quinn argued he should be in a special class of creditors because of steep pension and benefit cuts. He called the city’s plan unfair and legally defective.
The city’s General pension fund “doesn’t send me money every month for generosity,” he said. “I get the money because they owe me. They have a fiduciary obligation to pay me my pension.”
“Some people’s reduction is less than yours,” the judge said. “So, their pension payment is more than yours. Should they be in a separate class too? Where’s the line?”
The Detroit News: http://www.detroitnews.com/story/news/local/wayne-county/2014/10/27/detroit-bankruptcy-trial/17992123/
