Today, July 18, 2013, the City of Detroit filed for chapter 9 bankruptcy protection, becoming the largest municipality to file for bankruptcy in the United States. Today’s filing begins a 30 to 90 day period that will determine whether Detroit is eligible for chapter 9 protection.
Earlier today, Detroit’s two pension funds sued emergency manager Kevyn Orr in an attempt to prevent Orr from cutting pension benefits as part of a restructuring. Earlier this month, the city workers and retirees filed suit against Governor Rick Snyder arguing that he cannot authorize a bankruptcy filing if the filing includes plans to reduce pension benefits. The lawsuits ask the Ingham County Circuit Court to determine that the Michigan state constitution explicitly protects public pensions, and that any reduction to those pension benefits is unconstitutional. With a hearing on the city workers and retirees’ lawsuits scheduled for this coming Monday, the chapter 9 bankruptcy filing immediately stays that hearing and any other action against the City of Detroit.