Detroit Bankruptcy Trial Begins, Court To Decide Whether City Was Eligible To File For Chapter 9

DETROIT -- DETROIT (AP) — The city of Detroit for months has disclosed the awful condition of its finances. Now it's up to a judge to determine if the largest public bankruptcy in U.S. history really can go forward.

An unusual trial starts Wednesday, pitting Detroit's emergency manager and his legal team against unions and pension funds that claim the city isn't qualified to scrub its books clean under Chapter 9 bankruptcy.

A city isn't eligible for a bankruptcy makeover unless it shows that key steps were met, especially good-faith talks with creditors earlier this year. It's a critical decision for Judge Steven Rhodes: If Detroit clears the hurdle, the case then would quickly turn to how to solve at least $18 billion in debt and get city government off the ropes.

"It's a crucial point in the case," said lawyer Chuck Tatelbaum, a bankruptcy expert in Fort Lauderdale, Fla. "There will be others, but this is the go or no-go. ... If there was ever a poster child for what Congress decided when they enacted Chapter 9, it's for a city like this."

Jim Spiotto, a bankruptcy expert in Chicago, said it's "virtually impossible" to argue that Detroit is solvent.

MORE...

http://www.huffingtonpost.com/2013/10/23/detroit-bankruptcy-trial_n_4148765.html?ir=Detroit