Uh, oh: Detroit’s bankruptcy filing may be rejected

posted at 12:41 pm on November 15, 2013 by Erika Johnsen

Back in July, the city of Detroit filed for the largest municipal bankruptcy in United States’ history, with the city owing more than $18 billion in debt and liabilities following decades of purely blue leadership. The city’s appointed financial managers have already gotten to work on digging the city out of the massive hole into which it dug itself over the years, but not without the requisite challenges and lawsuits from unions and pension funds irate about the major losses that are going to be foisted upon everyone involved — and all of the work the city has done so far to save itself could be undone if a federal judge decides that Detroit is actually ineligible for Chapter 9 bankruptcy after all. Via the AP:

After a nine-day trial, Judge Steven Rhodes must decide whether Detroit really qualifies for the court’s help to fix its awful long-term finances — including $18 billion debt. Although they haven’t offered specifics, officials predict a “free-fall crisis” if the city is found ineligible and warn that the improved services, such as those streetlights, could suffer. …

“If the bankruptcy is disallowed, frankly, expect all hell to break loose,” said Anthony Sabino, a lawyer who teaches business law at St. John’s University in New York. “Detroit will be at the mercy of its creditors in individual lawsuits spread amongst federal and state courts. That chaos alone could doom the city.”

He compares it to animals in the wild — “wolves rending the carcass piece by piece.”

Emergency manager Kevyn Orr, the state appointee who now controls Detroit’s checkbook, acknowledges things will get worse if bankruptcy is rejected, but he’s not saying exactly how bad.

“The city would go back to where it was. We can’t go back,” he told a business group Tuesday.

The judge’s decision is expected any day now. The opposing unions in the case essentially tried to argue that the pre-bankruptcy negotiations weren’t really attempted in good faith by Orr and his financial team, who had basically already made up their minds to shoot for bankruptcy — but I imagine it would have been rather difficult to negotiate with groups that are still holding on to attitudes like this:

Ed McNeil, special assistant to the president of the American Federation of State, County & Municipal Employees Council 25, downplays the urgency expressed by Orr’s team.

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.


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Uh, oh: Detroit’s bankruptcy filing may be rejected

But we won’t know until the computers unfreeze and a few other bugs are worked out.

Flange on November 15, 2013 at 12:44 PM

Obama to the rescue with a bailout…

redshirt on November 15, 2013 at 12:45 PM

Quick! Get some of that “Obama Stash”

ToddPA on November 15, 2013 at 12:45 PM

Fiscal irresponsibility will lead to Detroit being picked apart by repo agents like copper thieves.

blammm on November 15, 2013 at 12:47 PM

Lots of golden parachutes for affluent Democrat politicians and civil servants are getting ready to cigarette roll on them.

smoothsailing on November 15, 2013 at 12:52 PM

Detroit’s debt is the (R)’s fault because all they want to do is snipe from the sidelines and sit at the children’s table.

rogerb on November 15, 2013 at 12:53 PM

Fiscal irresponsibility will lead to Detroit being picked apart by repo agents like copper thieves.

blammm on November 15, 2013 at 12:47 PM

And this would be a good thing…..

..kind of like if a Tornado hit Coatesville, PA.
it would cause 1 million in improvements…

ToddPA on November 15, 2013 at 12:53 PM

I wonder if ObamaCare can file bankruptcy.

faraway on November 15, 2013 at 12:58 PM

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.

It’s idiots like this that confirm the problem is this shell of a city. Eat it. You and yours deserve everything that’s coming to you.

HomeoftheBrave on November 15, 2013 at 12:59 PM

and all of the work the city has done so far to save itself could be undone if a federal judge decides that Detroit is actually ineligible for Chapter 9 bankruptcy after all.

I think this is unlikely. Based on things I’ve heard around the web, Steven Rhodes is a serious and sober minded man and about the best judge they could have gotten to take the case. The unions did not want to deal with him. If he rejects Detriot’s bankruptcy filing, I will be quite surprised.

Doomberg on November 15, 2013 at 1:01 PM

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.

Has anyone told Numbnuts that the city can’t pay it’s bills NOW?

GarandFan on November 15, 2013 at 1:01 PM

blammm on November 15, 2013 at 12:47 PM

What copper wiring? That’s looooong gone (as Ernie Harwell use to say). I was working in the city about ten years ago and we watched two bums strip an abandoned house of it’s bricks. One guy went inside and pushed the wall, while the other one stood outside and pulled. Gravity, showing a surprising sense of levity, caused the wall to fall on top of the guy outside. Good times in the city.

Flange on November 15, 2013 at 1:01 PM

Maybe the new mayor of Annapolis should take over Detroit as well.

22044 on November 15, 2013 at 1:03 PM

I would love to see it rejected.

dmacleo on November 15, 2013 at 1:03 PM

Since when is pre-bankruptcy negotiation a prerequisite to a bankruptcy filing? There is no such law. It is a mere contractual obligation that may be unrealistic and hence voidable.

pat on November 15, 2013 at 1:05 PM

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.

.
Doesn’t matter; you can’t pay the bills due today, much less those due tomorrow, next week or even further “down the road.”

ExpressoBold on November 15, 2013 at 1:07 PM

..kind of like if a Tornado hit Coatesville, PA.
it would cause 1 million in improvements…

ToddPA on November 15, 2013 at 12:53 PM

As a Chesco resident myself, I fully agree. It’s amazing how a cesspool like that can emerge in the middle of the wealthiest county in PA.

blammm on November 15, 2013 at 1:08 PM

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.

And they wonder why they’re in trouble. Detroit got the government it deserves. Own it.

Iblis on November 15, 2013 at 1:08 PM

Enjoy the crap sandwich liberals, this is a shining example of democrats in action…

crosshugger on November 15, 2013 at 1:08 PM

Detroit’s debt is the (R)’s fault because all they want to do is snipe from the sidelines and sit at the children’s table.

rogerb on November 15, 2013 at 12:53 PM

You say that jokingly, but leftists are actually blaming Republican policies for the collapse of Detroit. They say it’s those evil business leaders who moved all the good paying jobs overseas.

That’s like 0bama blaming insurance companies for peoples’ policies being cancelled.

UltimateBob on November 15, 2013 at 1:09 PM

Detroit’s debt is the (R)’s fault because all they want to do is snipe from the sidelines and sit at the children’s table.

rogerb on November 15, 2013 at 12:53 PM

As opposed to the Democrats and race hustlers (but I repeat myself) who actually wreaked the havoc for the last fifty years?

Detroit is a thoroughly entrenched Democratic Party plantation and is now the inevitable result of its corrupt governance and fiscal folly.

cheeflo on November 15, 2013 at 1:12 PM

1. If you like your plan you can keep your plan.
2. If you like your Dr. you can keep your Dr.
3. ObamaCare will lower insurance costs by 3000%
4. ObamaCare will not add one thin dime to the deficit.
5. Al queda is dead.
6. Detroit is alive.

mmmm obama’s not doing to well on all those promises he made campaigning.

HumpBot Salvation on November 15, 2013 at 1:13 PM

If the bankruptcy is disallowed, frankly, expect all hell to break loose

Implying that Detroit isn’t chaotic already??

VibrioCocci on November 15, 2013 at 1:14 PM

Judge most likely rules that the city did not negotiate in good faith, BUT further negotiations were impracticable, a loophole in the filing law, and thus the bankruptcy is allowed to continue.

The Judge knows that Detroit will collapse if he rejects the filing. He doesn’t want that on his record.

Tom Servo on November 15, 2013 at 1:17 PM

He compares it to animals in the wild — “wolves rending the carcass piece by piece.”

A fitting description to where Democrat policies will lead.

tommer74 on November 15, 2013 at 1:18 PM

A possible Amnesty solution…If illegals an survive inside Detroit for 10 years they can get citizenship…

I suspect many would choose to go home rather than be subjected to that hell…:)

William Eaton on November 15, 2013 at 1:19 PM

Racism, straight up.

Axeman on November 15, 2013 at 1:22 PM

Bailout, I agree. Let it burn, too. That would be an improvement.

Philly on November 15, 2013 at 1:28 PM

What demographic is this Detroit place anyway?

VorDaj on November 15, 2013 at 1:28 PM

We just re-elected our mayor and since then she has admitted the actual debt Houston has associated with its three pension plans (grunts, police, fire) is close to $10 billion. It all started under her watch while she was on council and it has all occurred in about 10 years.

All of the board members of the pensions are beneficiaries. All of them are fully aware of the practice of not funding them fully.

Why should the citizens, who never voted for the pensions and have no control of the funding be liable for any of the debt? They paid the taxes that were due when issued. How is it possible to encumber debt to people that have no say in the process?

This is going on everywhere. People need to be aware.

DanMan on November 15, 2013 at 1:30 PM

Racism, straight up.
 
Axeman on November 15, 2013 at 1:22 PM

 
I’m glad that accusation was over-used to the point of being meaningless, because that joke never gets old.

rogerb on November 15, 2013 at 1:35 PM

William Eaton on November 15, 2013 at 1:19 PM

If a half million conservatives moved to Detroit all at once from forever blue states like California and Massachusetts, Detroit would rebound almost instantly and Michigan would become solidly red. But don’t ask me to do it, I already left.

Flange on November 15, 2013 at 1:36 PM

I think this is unlikely. Based on things I’ve heard around the web, Steven Rhodes is a serious and sober minded man and about the best judge they could have gotten to take the case. The unions did not want to deal with him. If he rejects Detriot’s bankruptcy filing, I will be quite surprised.

Doomberg on November 15, 2013 at 1:01 PM

If the contemporaneous write-ups of the last day of hearings is an indication, Rhodes is going to buy the “didn’t negotiate in good faith” li(n)e.

Steve Eggleston on November 15, 2013 at 1:41 PM

Damn shutdown. Ted Cruz, this is on you.

mankai on November 15, 2013 at 1:46 PM

Racism, straight up.

Axeman on November 15, 2013 at 1:22 PM

I’m glad that accusation was over-used to the point of being meaningless, because that joke never gets old.

rogerb on November 15, 2013 at 1:35 PM

Cue Oprah…

mankai on November 15, 2013 at 1:46 PM

I’m glad that accusation was over-used to the point of being meaningless, because that joke never gets old.

rogerb on November 15, 2013 at 1:35 PM

And to add authenticity, I didn’t read more than a paragraph of the article.

Axeman on November 15, 2013 at 2:22 PM

If the bankruptcy filing is rejected, Kevin Orr and his team should just resign and walk away. The State of Michigan should walk away. Let Detroit do whatever it wants to within its shrinking borders. The only thing the State should do is provide National Guard escorts for anyone who wants out, and to establish a National Guard corridor around the city to prevent any attacks on the more fortunate who don’t live there.

CatoRenasci on November 15, 2013 at 2:32 PM

..kind of like if a Tornado hit Coatesville, PA.
it would cause 1 million in improvements…

ToddPA on November 15, 2013 at 12:53 PM

As a Chesco resident myself, I fully agree. It’s amazing how a cesspool like that can emerge in the middle of the wealthiest county in PA.

blammm on November 15, 2013 at 1:08 PM

Wow! You’re just to the East of me…I’m in Lancaster County.

ToddPA on November 15, 2013 at 2:37 PM

Detroit is the logical outworking of the democrat worldview.

Murphy9 on November 15, 2013 at 2:38 PM

Racism, straight up.
 
Axeman on November 15, 2013 at 1:22 PM

 
I’m glad that accusation was over-used to the point of being meaningless, because that joke never gets old.
 
rogerb on November 15, 2013 at 1:35 PM

 
And to add authenticity, I didn’t read more than a paragraph of the article.
 
Axeman on November 15, 2013 at 2:22 PM

 
Word.

rogerb on November 15, 2013 at 3:00 PM

Why doesn’t Detroit just raise taxes so they can give more entitlements to people who live there? That would solve everything.

malclave on November 15, 2013 at 3:04 PM

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.

A rather perfect summation of liberal economic philosophy.

Shump on November 15, 2013 at 3:10 PM

1. If you like your plan you can keep your plan.
2. If you like your Dr. you can keep your Dr.
3. ObamaCare will lower insurance costs by 3000%
4. ObamaCare will not add one thin dime to the deficit.
5. Al queda is dead.
6. Detroit is alive.

mmmm obama’s not doing to well on all those promises he made campaigning.

HumpBot Salvation on November 15, 2013 at 1:13 PM

This just needs to be bumped.

Adjoran on November 15, 2013 at 3:11 PM

Why doesn’t Detroit just raise taxes so they can give more entitlements to people who live there? That would solve everything.

malclave on November 15, 2013 at 3:04 PM

They need a municipal minimum wage at say $25/hr. Problem solved.

Murphy9 on November 15, 2013 at 3:18 PM

This is just a silly post. All it does is acknowledge a basic truth about litigation: A final judgment could go either way: The city wins, or the city loses. More interesting than than just acknowledging that one of two possible outcomes exist would be some insight into the likely outcome of the trial; is it likely that the petition will be denied?

Jazz on November 15, 2013 at 3:30 PM

Only Bankruptcy judges can cancel union contracts

That is what this is about

It wasn’t just unions that killed Detroit, but somewhere the unions have to accept the golden goose is dead

They must think they can get more by lawsuit. Cancel the union contracts and they may be stuck with jobs they do not want.

The hyenas are fighting over the good cuts.

entagor on November 15, 2013 at 4:01 PM

Nothing could please me more than detailed, national coverage of AFSCME like the jackals they are picking clean the bones of Detroit. And show the faces of their leadership on the news at every opportunity.

M240H on November 15, 2013 at 4:13 PM

I think of the city of Detroit in the same way that Gen. George Patton thought of the province of Lorraine in France in 1944: he said something to the effect of, “In the final settlement of the war, we should make the Germans keep the Lorraine. I can think of no greater burden than to be saddled with this miserable little country, where it rains every day and the wealth of the population is measured in assorted piles of manure.”

Similarly, bankruptcy or no, we should make the donks keep having to run Detroit. I can think of no more shining example for all the world to see of what happens when you leave them in charge of things for any length of time.

Spurius Ligustinus on November 15, 2013 at 5:09 PM

“…all Hell will break loose…”

Hey, just in time, “Low Winter Sun” needs some more stories to tell.

Another Drew on November 15, 2013 at 7:03 PM

A possible Amnesty solution…If illegals an survive inside Detroit for 10 years they can get citizenship…

I suspect many would choose to go home rather than be subjected to that hell…:)

William Eaton on November 15, 2013 at 1:19 PM

Wasn’t there some sci-fi apocalyse story along those lines sometime?
If not, there ought to be.

AesopFan on November 15, 2013 at 8:00 PM