Detroit Wants Initial Hearing in Bankruptcy Case on July 23rd image

Detroit, which filed for bankruptcy on July 18th, wants to have its initial hearing on July 23rd.

According to the Chapter 9 of the U.S. Bankruptcy Code the majority of lawsuits against a city will be temporarily canceled so that the municipality could reorganize its debt and operations without distraction. It’s been decades since Detroit has been struggling with decline and increasing debt, reaching $20 billion, to be paid to city workers, retirees and bondholders.

Detroit asked U.S. Bankruptcy Judge Steven W. Rhodes to confirm the rights offered under the bankruptcy and the move comes after a state court judge has ordered Governor Rick Snyder to withdraw the bankruptcy filling as the case violates the Michigan constitution.

“I really didn’t want to go in this direction – but now that we are here, we have to make the best of it,” said Detroit Mayor Dave Bing. “Paychecks for our city employees will continue, services will continue.”

Ed McNeil, who is the lead negotiator representing a coalition of 33 unions, said that this move is a ‘power grab’ and that the only purpose of this is to fix the governor’s agenda to take over the city. Michigan’s Governor Rick Snyder said that he approved the request for Chapter 9 bankruptcy as this would be the only feasible path to offer a way out and end the “cycle of ever decreasing services”.

Source: Bloomberg