The City of Detroit is Finally Bankrupt
For decades, the fate and the fall of Detroit has been a deliberated across America. A tragic emblem of decline and decay, arson and abandonment, the city once known as a glistening beacon of automotive power has been relegated to primarily serving as the subject of countless bleak photo essays, documentaries, and news reports. Where sprawling factories once teemed with financial life, the overgrown husks of defunct industries now serve as drafty squatting locations for scrappers, addicts, and the homeless. How long and how far could the languishing city fall? For years, no one was certain. But now, in an unprecedented case that’s causing an uproar of opinion, the dying city has at last been granted bankruptcy — and perhaps, in turn, a chance at a new life.
A City Over $18B in Debt
In terms of reputation, appearance, infrastructure, and crime, the city of Detroit is less than pristine. Notoriously, nearly half of its streetlights don’t work — and are too expensive to be maintained. Over 75,000 homes stand abandoned, peeling, and crumbling across a swath of land that’s being steadily reclaimed by both nature and arsonists. The average police response time is nearly an hour — over five times the national average. Train stations, hotels, and skyscrapers stand like concrete ghosts, inhabited only by transients and stray animals.
At the heart of Detroit’s problems: money. Or rather, the sore lack thereof. No money to illuminate the streets at night; no money to repair and refill thousands upon thousands of vacated structures; no money to provide firefighters with reliable equipment. Most of all, no money to pay back thousands of antsy creditors — who are collectively owed some $18.5 billion.
On July 18th, the beleaguered city filed for bankruptcy. Then and now, the move was controversial. One on hand, thousands of workers, understandably afraid to lose the pensions and retirement benefits they’d worked for years to secure. On the other, a nightmarish financial hole too deep to ever be realistically escaped from.
Which would take precedence?
Judge Rhodes Grants Detroit Chapter 9 Bankruptcy
The momentous decision rested on the shoulders of U.S. Judge Steven Rhodes. And now, Rhodes has announced his decision to the world: Detroit will be granted a Chapter 9 bankruptcy. Rhodes cited the city’s abysmal financial health, saying that negotiating and paying back debts to thousands of separate creditors — on top of amending the city’s hugely expensive (and dangerous) lack of basic services — would simply be not be feasible.
Kevyn Orr, the city’s emergency manager, has announced that he will unveil a plan to bring the city from insolvency back to solvency by January, 2014; but he’s keeping many details close to the vest. While Orr has proposed an exchange of $2 billion toward creditors in exchange for $11 billion in debt unsecured by collateral, the controversial emergency manager isn’t disclosing precisely how much of a debt reduction he is seeking, or even if the two-for-eleven plan is still being considered.
Many, who support the widely-held opinion that Detroit was ultimately condemned to fall into oblivion without significant financial intervention, are relieved by Rhodes’ decision. Others, however, are fighting back. Rhodes has blocked any appeals to the 6th Circuit of the U.S. Court of Appeals, instead pushing opponents of his verdict to attempt to appeal the decision in bankruptcy court. That is precisely what the American Federation of State, County, and Municipal Employees Council 25 intends to do.
AFSCME attorney Sharon Levine says that the average Detroiter receives nearly $20,000 in annual pension benefits — or, is supposed to. With the bankruptcy in effect, those pensions may disappear. She says, “When we were coming out of the courthouse it was snowing, and people were asking us, ‘Am I going to lose my house?'”
Freedom from crippling debt might finally allow the suffocating city to breathe — but worried pensioners may be out in the cold this winter. Detroit may have been granted its bankruptcy, but it looks like the battle is far from over. All that’s certain is that the city of Detroit is finally bankrupt.
If you or a loved one is seeking financial relief through bankruptcy, contact the law offices of Maselli Warren online, or call us today at (800) 891-2657.