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Judge Asks Detroit to Withdraw Bankruptcy

Judge Asks Detroit to Withdraw Bankruptcy

A judge in Michigan ruled Friday that the bankruptcy filing by the city of Detroit with estimated debts of $18.5 billion – the largest municipal bankruptcy in U.S. history – violates the state's Constitution and must be withdrawn.

Ingham County Circuit Judge Rosemarie Aquilina on Friday ordered Detroit to withdraw its bankruptcy filing as it violated the Michigan Constitution, according to Detroit Free Press.

"I have some very serious concerns because there was this rush to bankruptcy court that didn't have to occur and shouldn't have occurred," Aquilina was quoted as saying. "Plaintiffs shouldn't have been blindsided … this process shouldn't have been ignored."

Aquilina asked Gov. Rick Snyder and Detroit emergency manager Kevyn Orr to ensure the pension benefits of City of Detroit retirees will not diminish.

Attorney General Bill Schuette issued a statement, saying he will appeal the rulings in three cases filed before Aquilina.

In her order, Aquilina said, "In order to rectify his unauthorized and unconstitutional actions ... the governor must (1) direct the emergency manager to immediately withdraw the Chapter 9 petition filed on July 18, and (2) not authorize any further Chapter 9 filing which threatens to diminish or impair accrued pension benefits."

The city of Detroit filed for bankruptcy on Thursday.

"We have a great city, but a city going downhill for the last 60 years." Snyder said at a press conference. The governor said 38 percent of Detroit's budget has been going into what he called "legacy costs," such as pensions and debt service. He added that police take almost an hour to respond to calls, and 40 percent of street lights are turned off. "That's unacceptable."

"We feel fairly confident that we have engaged in good faith, and I don't think anybody's debating that, whether or not Detroit is insolvent," Orr told the Press on Friday. "But then we really need to get to a plan of adjustment so we intend to continue to negotiate – even today. Our advisers are sitting down with some of our creditors and working on what I hope they will announce in the next couple of days or weeks."

Mayor Dave Bing has said the bankruptcy will not affect public services or payments for public workers.

Douglas Bernstein, a partner with Plunkett Cooney law firm in Birmingham, Mich., said he was surprised by Aquilina's order. "This is generally how bankruptcies occur: You file bankruptcy when there is an impending crisis at the 11th hour," he was quoted as saying. "You file bankruptcies to stave off litigation."

However, Aquilina, who has a Democratic background, seems ready for the fight. "Let's get this moving to the Court of Appeals because that's where you all are headed." She also asked that a copy of her judgment be sent to President Barack Obama.


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