Finance

Feds Have Jurisdiction over Detroit Bankruptcy Case, Court Rules

U.S. Bankruptcy Judge Steven Rhodes on Wednesday stayed lawsuits challenging Detroit's historic bankruptcy filing.
July 24, 2013

U.S. Bankruptcy Judge Steven Rhodes on Wednesday stayed lawsuits challenging Detroit's historic bankruptcy filing.

 
Rhodes ruled that the federal court has full jurisdiction over the city's eligibility for bankruptcy, rejecting arguments that state courts should hear challenges to the constitutionality of the Chapter 9 filing.
 
He said that in past Chapter 9 municipal bankruptcy cases, "it was the bankruptcy court that determined all of the eligibility issues raised by the parties."
 
Detroit Emergency Manager Kevyn Orr with the governor's approval filed for Chapter 9 bankruptcy on July 18 after years of budget cuts, months of state intervention and weeks of negotiations with debt holders and unions failed to bring significant relief to the city's estimated $18 billion in long-term obligations.
 
Representatives of the city's pension systems and others have filed lawsuits seeking to halt the proceedings because the pensions of Detroit employees and retirees are expected to be at risk under bankruptcy, despite being protected by Michigan law.

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