Judge clears Detroit for bankruptcy protection

It took about five months of political, legal, and financial finagling, but a bankruptcy judge has ruled that Detroit is now finally, officially eligible for bankruptcy protection in what is now the largest municipal bankruptcy in U.S. history after the decades on decades of profligate and purely progressive leadership steadily ground Detroit down from its postwar status as America’s fourth-largest city. Via NBC:

“The city no longer has the resources to provide its citizens with basic police, fire and emergency services,” Judge Rhodes said, ruling that Detroit, once the nation’s fourth-largest city, “was and is insolvent.”

The long-awaited decision sets up a bitter battle between the city’s finance officials and its unions, creditors and retirees, who expect deep cuts in pensions and sales of treasured city assets, such as its art collection, as part of the Chapter 9 process. …

In the meantime, Detroit’s emergency financial manager, Kevyn Orr, is expected to proceed towards the city’s next major step: submitting a plan to adjust Detroit’s approximately $18 billion in debt. Judge Rhodes said he will not stay the bankruptcy proceedings in the wake of any possible appeals.

From the beginning, the overwhelming sticking point of the bankruptcy filing was whether or not the city’s managers negotiated “in good faith” with the relevant unions and pensioners, usually a prerequisite for bankruptcy eligibility and one which the unions vehemently argued that the city categorically did not meet. The judge ruled that the city may have left something to be desired on that front, but that it’s also kind of impossible to negotiate with a “stone wall” and that the city’s extremely dire financial woes were the trump card here.

The legal battle certainly isn’t over, however; no doubt the unions will continue to appeal the ruling as many times as they possibly can, and the judge did iterate that he would be keeping a watchful eye over the proceedings, but the good news is that municipal managers can at last get to work on submitting a plan to pay off part of Detroit’s more than $18 billion in debts and to start reinvesting in the severely lacking essential services. As the judge noted in his ruling:

“We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”

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