Captain Rick: A federal judge gave approval for Detroit to proceed with its bankruptcy … the largest municipal bankruptcy in history. Billions of dollars of payments owed to city employees, retirees, investors an creditors are on the ‘chopping block’. Most U.S. municipal pension plans are on a road to eventual failure. This is a ‘wake-up-call’ for all public employees who have been looking forward to the ‘pension dream’ promised by their municipal employers.
The ruling opens the door for the city to cut billions of dollars in payments that are owed to city employees, retirees, investors and other creditors.
Unions and pension funds had argued that the city should not be eligible to use bankruptcy court protections. They said that regardless of the Detroit’s financial troubles, city and state officials did not negotiate with creditors in good faith in an effort to reach a deal on its liabilities.
In his ruling, Judge Steven Rhodes found the city did not meet that threshold, yet he ruled that such negotiations were impractical because of the huge number of creditors, which total more than 100,000. So, ultimately, he concluded that the city filed its petition properly.
Opponents have argued that pension cuts are barred by the state’s constitution. But Judge Rhodes ruled that pensions are fair game under federal bankruptcy law, trumping state law, though he noted that didn’t mean he would definitely approve cuts.
As the bankruptcy moves forward, tens of thousands of workers and retirees are bracing for benefit cuts.
Read Captain Rick’s breaking and in-depth reports:
Detroit: Its Rise and Fall … What went wrong?
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