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Protecting Detroit pensions may violate bankruptcy code: judge
Source: Reuters
Protecting Detroit pensions may violate bankruptcy code: judge
By Joseph Lichterman
DETROIT | Mon Oct 21, 2013 7:39pm EDT
(Reuters) - The federal judge overseeing Detroit's bankruptcy filing called the city's pension funds "unsecured creditors" and stated that any special protections for them would violate federal bankruptcy law.
The statement by U.S. Bankruptcy Judge Steven Rhodes, in an exchange with an attorney representing Detroit's two pension funds, came in the closing session of a three-day hearing examining legal issues in the bankruptcy case.
The judge will hold a trial, starting Wednesday, to determine if Detroit is eligible for protection under Chapter 9 of the U.S. Bankruptcy Code while it tries to restructure $18.5 billion in debt and other liabilities including pension funds the city says are underfunded by $3.5 billion. The city filed the largest municipal bankruptcy in U.S. history on July 18.
Robert Gordon, the pension funds' attorney, argued that the city should not be eligible for bankruptcy protection because Michigan's constitution protects pensions from impairment and the city did stipulate in its filing that pensions could not be cut.
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By Joseph Lichterman
DETROIT | Mon Oct 21, 2013 7:39pm EDT
(Reuters) - The federal judge overseeing Detroit's bankruptcy filing called the city's pension funds "unsecured creditors" and stated that any special protections for them would violate federal bankruptcy law.
The statement by U.S. Bankruptcy Judge Steven Rhodes, in an exchange with an attorney representing Detroit's two pension funds, came in the closing session of a three-day hearing examining legal issues in the bankruptcy case.
The judge will hold a trial, starting Wednesday, to determine if Detroit is eligible for protection under Chapter 9 of the U.S. Bankruptcy Code while it tries to restructure $18.5 billion in debt and other liabilities including pension funds the city says are underfunded by $3.5 billion. The city filed the largest municipal bankruptcy in U.S. history on July 18.
Robert Gordon, the pension funds' attorney, argued that the city should not be eligible for bankruptcy protection because Michigan's constitution protects pensions from impairment and the city did stipulate in its filing that pensions could not be cut.
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Read more: http://www.reuters.com/article/2013/10/21/us-usa-detroit-bankruptcy-idUSBRE99K19W20131021
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