Creditors file objections to Detroit bankruptcy

Published on NewsOK Modified: August 19, 2013 at 9:37 pm •  Published: August 19, 2013
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DETROIT (AP) — The city's biggest employee union, retirees and even a few dozen residents filed objections Monday to Detroit's request for bankruptcy protection, the largest municipal filing in U.S. history and a move aimed at wiping away billions of dollars in debt.

The filing by the American Federation of State, County & Municipal Employees Michigan Council 25 also came before expected objections from two city pension systems, bondholders, banks and others who hope to convince federal Judge Steven Rhodes not to allow the Chapter 9 petition by Detroit emergency manager Kevyn Orr.

Rhodes set Monday as the eligibility objection deadline. Attorneys for large creditors have until just before midnight to file objections electronically. Individual creditors who fear losing their pensions and paying more for health care began filing objections Monday in person at the court.

By early Monday evening, more than 100 objections had been filed including those made by several smaller city unions.

"We think the creditors and banks will make objections during the litigation on a proposed plan of adjustment, which we are slating to be finished by year's end," said Bill Nowling, spokesman for Orr.

Since 1954, 29 of 62 municipal bankruptcies pursued in the U.S. have been dismissed.

The AFSCME, the AFL-CIO and city retirees claim in their objection that Michigan's emergency manager law — which gives Orr his authority — impairs vested pension rights violating the state constitution. They also claim Orr did not negotiate in good faith with city creditors and that he has not yet proved Detroit is insolvent.

"The city, led by its unelected, politically appointed emergency manager ... hastily commenced this unconstitutional, unlawfully authorized Chapter 9 proceeding seeking the haven of bankruptcy to illegally attempt to slash pension and other post-employment benefit obligations and cram such reductions down the throats of current and former city employees such as the AFSCME Detroit Employees," read their objection.

Orr, hired in March by the state to fix Detroit's finances, has said there are no other options for Detroit. The city's budget deficit has hovered near or above $300 million during the past few years.

He filed for bankruptcy on July 18, claiming the city has at least $18 billion in liabilities, from underfunded pensions and health care costs to bonds that lack city revenue to be paid off.

Orr also stopped payment on $2.5 billion in debt in June.

Michigan Attorney General Bill Schuette, who earlier joined the battle on behalf of city pensioners, wrote in a 20-page statement filed Monday in federal court that constitutional protections cannot be stepped on.

"No reasonable person can disagree that the city of Detroit is bankrupt and that federal bankruptcy proceedings under the leadership of emergency manager Kevyn Orr is the only avenue to rebuild the Motor City," Schuette, a Republican, said in a release. "However, throughout this bankruptcy process, protections enshrined in the Michigan Constitution ... must be honored, respected and followed."



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