Federal Judge Bars Challenges to Detroit’s Bankruptcy Filing

Federal Judge Bars Challenges to Detroit’s Bankruptcy Filing

Federal Judge Bars Challenges to Detroit’s Bankruptcy Filing

The federal judge overseeing Detroit's bankruptcy ruled that city employees could not go to state courts to keep their pensions out of the bankruptcy case.

Published July 25, 2013

The path to Detroit’s bankruptcy filing was cleared Wednesday when a federal judge ruled that the city’s case can move ahead without being derailed by legal challenges.

The ruling came a week after Detroit became the largest city in American history to file for bankruptcy, a result of mountainous debt and a depleted population and tax base.

In the ruling, Judge Stephen Rhodes of the United States Bankruptcy Court effectively barred any lawsuits against city officials as well as Michigan’s Governor Rick Snyder and emergency manager Kevyn Orr.

There has been considerable concern in Detroit about how the bankruptcy filing by the city will affect the pension and health-care benefits for the thousands of retirees. But the judge said that any issues related to retiree benefits would be dealt with in the hearings that are to come and that the federal bankruptcy court held “exclusive jurisdiction” over such matters.

The bankruptcy filing has been as stunning a development as it has been controversial. In fact, there were protesters who demonstrated outside of the courthouse in downtown Detroit contending that Snyder and Orr had gone far beyond their authority by agreeing to file for Chapter 9 bankruptcy.

While many officials and civil leaders in Detroit are resigned to the fact that bankruptcy might well be the best way to solve the city’s financial woes, many are nonetheless angered by the decision by Orr, whose presence represents to them unlimited power by an official who has never been elected to any office.

“We believe that the mayor, who is the duly elected head official in the city, has the right to do this kind of thing,” said the Rev. Wendell Anthony, the head of the Detroit chapter of the NAACP, speaking with BET.com. “We have never supported the emergency manager position for Detroit.”

Detroit’s bankruptcy filing was a result of long-term debt of $18 billion or more. The city’s population has shrunk dramatically over the last few decades and its tax base has eroded as a result. About 85 percent of Detroit’s 700,000 residents are African-American.

Pensioners are anxious. Retired police officer K.D. Bullock, 70, gets a monthly benefit of $2,400. He's worried about that check getting smaller in bankruptcy and wonders if he'll have to sell his home in the historic Indian Village neighborhood, one of Detroit's most stable areas.

"It just means our lifestyle is going to change — we have no way of knowing," Bullock said.

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(Photo: AP Photo/Paul Sancya)

Written by Jonathan P. Hicks


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