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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That contention also will be part of the objections that will be filed by the city's two employee pension systems, said Bruce Babiarz, spokesman for Detroit's Police and Fire Retirement System and General Retirement System.

The systems are the city's two largest unsecured creditors.

Detroit has about 21,000 retired workers who are owed benefits, with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.

Mary Dugans, one of those retirees, filed an individual objection Monday.

"I need my pension for basic human needs," she wrote in her one-page filing. "Additionally, I'm 80 years old with age related medical conditions. Therefore, I have to pay for medical co-pays as well as for prescribed medications. Please consider my situation as you approach this important matter. Thanks."

Monday's deadline for objections drew protesters outside federal court in Detroit.

Some in a group of about 30 people amassed outside the building said in their filings that there are no provisions in Chapter 9 that gave Orr authority to file the bankruptcy petition and that it was done without the consent of the city's elected representatives.

"Hopefully, we'll have the opportunity to argue why Detroit should not be allowed to go into bankruptcy," said the Rev. Charles Williams II, Michigan chapter president of the National Action Network, which opposes the state's emergency law.

But only creditors holding accepted claims likely have standing to object to Orr's petition, according to James McTevia, a turnaround expert and managing member of McTevia & Associates.

"While there is no doubt that ... residents are seriously affected by the city of Detroit's problems and the ultimate resolutions, it is my opinion that they are not either individually or collectively creditors," he wrote Monday in an email to The Associated Press.

Monday's deadline is just one of several steps that could lead to Judge Rhodes allowing Detroit into bankruptcy protection while it restructures.

Some bankruptcy experts say it can be difficult for objections to stop a bankruptcy, but they have proved successful in a few cases. Boise County, Idaho, failed to go into bankruptcy after objections that the county was not insolvent. Harrisburg, Pa., failed the garner protection because its bankruptcy filing was not authorized by state law.

The city has until Sept. 6 to file its responses to any objections by creditors. A multi-day hearing on the eligibility question is scheduled to start Oct. 23.

"Objecting creditors are individual parties in interest in the Chapter 9 bankrupt estate," McTevia wrote. "It is doubtful that the judge will render a blanket ruling either accepting or rejecting all objections."