How does a whole city file for bankruptcy??!?!
Via Detroit Free Press reports:
The City of Detroit filed this afternoon for Chapter 9 bankruptcy protection in federal court, laying the groundwork for a historic effort to bail out a city that is sinking under billions of dollars in debt and decades of mismanagement, population flight and loss of tax revenue.
The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.
Detroit emergency manager Kevyn Orr, who in June released a plan to restructure the city’s debt and obligations that would leave many creditors with much less than they are owed, had warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.
Gov. Rick Snyder would have to sign off on the filing. A spokeswoman did not immediately return telephone calls today.
Orr’s spokesman Bill Nowling would not confirm today that the filing is imminent. However, he said, “Pension boards, insurers, it’s clear that if you’re suing us, your response is ‘no.’ We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents.”
The 30- to 90-day eligibility fight could be prolonged beyond that time frame if creditors mount a significant challenge to Detroit’s eligibility for bankruptcy. In other communities that have filed for Chapter 9 protection, such fights have extended the process a year or more, including Jefferson County, Ala., and Stockton, Calif., two of the largest municipal bankruptcy filings so far in the U.S.
Detroit’s would be by far the largest municipal bankruptcy in U.S. history, in terms of the city’s population of about 700,000 and the amount of its debts and liabilities, which Orr has said could be as high as $20 billion. Because of the stakes involved, and the impact on residents statewide, as well as 30,000 current and retired city workers and Detroit’s ability to stay in business, the case could be precedent setting in the federal judiciary. It could also set an important trajectory for the way troubled cities nationwide settle their financial difficulties.
How do you feel about Detroit becoming the biggest bankruptcy case in US history??