Detroit bankruptcy

Details from the Detroit bankruptcy filing.

The city of Detroit, Michigan, filed for Chapter 9 bankruptcy on July 18, 2013. It is the largest municipal bankruptcy filing in U.S. history by debt, estimated at $18–20 billion, exceeding Jefferson County, Alabama's $4-billion filing in 2011.[1] Detroit is also the largest city by population in U.S. history to file for Chapter 9 bankruptcy, more than twice as large as Stockton, California, which filed in 2012. While Detroit's population had declined from a peak of 1.8 million in 1950, its July 2013 population was reported by The New York Times as a city of 700,000. [1]

Detroit's bankruptcy filing followed a declaration of financial emergency in March 2013 that resulted in Kevyn Orr being appointed as "emergency manager" of the city by Michigan Governor Rick Snyder. Orr's subsequent negotiations sought to get creditors to willingly agree to debt restructuring and accept less than initially agreed on Detroit's debt, and were ultimately unsuccessful.[2][3]

On July 19, 2013, Judge Rosemarie Aquilina of the Thirtieth Judicial Circuit Court of Michigan ruled the bankruptcy filing by Detroit violated Article IX, Section 24, of the Michigan Constitution and ordered Governor Rick Snyder to withdraw the filing immediately.[4] On July 23, an appeals court stayed the circuit court ruling pending future rulings on Michigan Attorney General Bill Schuette's appeal.[5][6] On July 24, the Bankruptcy Court added its own, federal stay of the state court proceedings.[7] On August 2, the bankruptcy court set a hearing date of October 23, 2013, for trial on any objections to the city's eligibility for Chapter 9 bankruptcy, and March 1, 2014, as the deadline for the city to file a bankruptcy plan.[8] After a nine-day trial on eligibility, the Bankruptcy Court on December 3, 2013, ruled Detroit eligible for Chapter 9 on its $18.5 billion debt.[9] On June 3, 2014 the Michigan Legislature passed a package of bills to help Detroit avoid further bankruptcy proceedings.[10] On the same day, Governor Snyder pledged to sign the package of bills.[10]

After a two-month trial, Judge Steven W. Rhodes confirmed the city's plan of adjustment on November 7, 2014, paving the way for Detroit to exit bankruptcy.[11] Creditors and insurers were expected to absorb losses totaling $7 billion, with creditors receiving between 14 and 75 cents on the dollar.[12][13]

  1. ^ a b Davey, Monica; Walsh, Mary Williams (July 18, 2013). "Billions in Debt, Detroit Tumbles Into Insolvency". The New York Times. Retrieved July 19, 2013.
  2. ^ Cite error: The named reference michigangov was invoked but never defined (see the help page).
  3. ^ Shepardson, David (July 11, 2013). "White House not offering Detroit help to avoid bankruptcy". The Detroit News. Archived from the original on July 19, 2013. Retrieved July 19, 2013.
  4. ^ Mullen, Ann (July 19, 2013). "Judge rules Detroit Chapter 9 bankruptcy filing unconstitutional". Detroit: WXYZ-TV. Archived from the original on July 23, 2013. Retrieved July 19, 2013.
  5. ^ Egan, Paul (July 19, 2013). "Michigan AG challenges judge's ruling that Detroit bankruptcy is unconstitutional". Detroit Free Press. Archived from the original on July 31, 2013. Retrieved July 19, 2013.
  6. ^ Michigan Appeals Court halts challenges to Detroit's bankruptcy filing CNBC, July 23, 2013
  7. ^ Woodall, Bernie; Lichterman, Joseph (July 24, 2013). "U.S. judge halts challenges to Detroit's bankruptcy bid". Reuters. Retrieved July 24, 2013.
  8. ^ "First Order Establishing Dates and Deadlines" (PDF). U.S. Bankruptcy Court for the Eastern District of Michigan. August 2, 2013. Archived from the original (PDF) on February 22, 2014. Retrieved August 2, 2013.
  9. ^ Joseph Lichterman; Bernie Woodall (December 3, 2013). "In largest-ever U.S. city bankruptcy, cuts coming for Detroit creditors, retirees". Reuters. Retrieved December 3, 2013.
  10. ^ a b Dolan, Matt (June 3, 2014) Michigan Gov. Snyder Pledges to Sign Detroit Package Wall Street Journal.
  11. ^ Bomey, Nathan; Helms, Matt; Guillen, Joe (November 7, 2014). "Judge OKs bankruptcy plan; a 'miraculous' outcome". The Detroit Free Press. Retrieved November 10, 2014.
  12. ^ Dolan, Matthew (November 7, 2014). "Judge Approves Detroit's Bankruptcy-Exit Plan". The Wall Street Journal. Retrieved February 8, 2016.
  13. ^ Weissmann, Jordan (November 7, 2014). "Detroit Exits Bankruptcy, Thanks to Its Art Museum". Slate. Retrieved February 8, 2016.