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Uh, oh: Detroitís bankruptcy filing may be rejected
Hotair ^ | 11/15/2013 | Erika Johnsen

Posted on 11/15/2013 9:46:47 AM PST by SeekAndFind

Back in July, the city of Detroit filed for the largest municipal bankruptcy in United States’ history, with the city owing more than $18 billion in debt and liabilities following decades of purely blue leadership. The city’s appointed financial managers have already gotten to work on digging the city out of the massive hole into which it dug itself over the years, but not without the requisite challenges and lawsuits from unions and pension funds irate about the major losses that are going to be foisted upon everyone involved — and all of the work the city has done so far to save itself could be undone if a federal judge decides that Detroit is actually ineligible for Chapter 9 bankruptcy after all. Via the AP:

After a nine-day trial, Judge Steven Rhodes must decide whether Detroit really qualifies for the court’s help to fix its awful long-term finances — including $18 billion debt. Although they haven’t offered specifics, officials predict a “free-fall crisis” if the city is found ineligible and warn that the improved services, such as those streetlights, could suffer. …

“If the bankruptcy is disallowed, frankly, expect all hell to break loose,” said Anthony Sabino, a lawyer who teaches business law at St. John’s University in New York. “Detroit will be at the mercy of its creditors in individual lawsuits spread amongst federal and state courts. That chaos alone could doom the city.”

He compares it to animals in the wild — “wolves rending the carcass piece by piece.”

Emergency manager Kevyn Orr, the state appointee who now controls Detroit’s checkbook, acknowledges things will get worse if bankruptcy is rejected, but he’s not saying exactly how bad.

“The city would go back to where it was. We can’t go back,” he told a business group Tuesday.

The judge’s decision is expected any day now. The opposing unions in the case essentially tried to argue that the pre-bankruptcy negotiations weren’t really attempted in good faith by Orr and his financial team, who had basically already made up their minds to shoot for bankruptcy — but I imagine it would have been rather difficult to negotiate with groups that are still holding on to attitudes like this:

Ed McNeil, special assistant to the president of the American Federation of State, County & Municipal Employees Council 25, downplays the urgency expressed by Orr’s team.

“Eighteen billion dollars — that’s down the road. You’re not talking about money due today,” McNeil said.



TOPICS: Business/Economy; Government; News/Current Events; US: Michigan
KEYWORDS: bankruptcy; detroit

1 posted on 11/15/2013 9:46:47 AM PST by SeekAndFind
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To: SeekAndFind

Or it may not.


2 posted on 11/15/2013 9:50:02 AM PST by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: SeekAndFind

What’s the judge going to do? Confiscate all the property in the city and hand it over to the employees?


3 posted on 11/15/2013 9:52:49 AM PST by DManA (enis)
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To: SeekAndFind
"downplays the urgency ...
“Eighteen billion dollars — that’s down the road. You’re not talking about money due today"

And there lies the entire problem with politicians - Democrats in particular.

4 posted on 11/15/2013 9:54:54 AM PST by alancarp (Obama will grab your guns and ship them to Mexican drug mobs.)
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To: SeekAndFind

Eighteen billion dollars? Don’t worry about it, it’s not due today.

Now there’s a man who knows how to live in the present and not let tomorrow’s problems upset him today.


5 posted on 11/15/2013 9:55:22 AM PST by count-your-change (you don't have to be brilliant, not being stupid is enough)
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To: SeekAndFind

My knowledge of bankruptcy law is pretty limited but if the city is not allowed to go bankrupt wouldn’t they simply stop making payments until someone sued them into bankruptcy?


6 posted on 11/15/2013 9:55:29 AM PST by RightOnTheBorder
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To: SeekAndFind

Hurray! Detroit is not bankrupt after all! All is well!


7 posted on 11/15/2013 9:57:07 AM PST by PGR88
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To: RightOnTheBorder

“wouldn’t they simply stop making payments until someone sued them into bankruptcy?”

It would appear the judge is saying, “come back when you can’t make the payments.” BTW, they have plenty of assets to sell. They haven’t because that would delay filing and they’d lose the money to current debts.


8 posted on 11/15/2013 10:03:40 AM PST by Gen.Blather
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To: RightOnTheBorder
The problem with bankruptcy law and Rule of Law today is.....

Anything Goes!

There is no stability in law today and the more powerful can make it up as they go along.

9 posted on 11/15/2013 10:03:54 AM PST by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: DManA
What’s the judge going to do? Confiscate all the property in the city and hand it over to the employees?

That would be Obama's preferred solution I'm sure. Knowing him, I'd be surprised if he didn't try to do just that by eminent domain and/or executive order.

10 posted on 11/15/2013 10:09:54 AM PST by Maceman (Just say "NO" to tyranny.)
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No bankruptcy means that a tax-payer funded bailout from fedgov is coming.


11 posted on 11/15/2013 10:11:35 AM PST by AlmaKing
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To: AlmaKing
No bankruptcy means that a tax-payer funded bailout from fedgov is coming.

Hope they like Monopoly money!

12 posted on 11/15/2013 10:14:39 AM PST by COBOL2Java (I'm a Christian, pro-life, pro-gun, Reaganite. The GOP hates me. Why should I vote for them?)
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To: Gen.Blather

Maybe do sell it to the Chinks...swap it for the entire national debt. After that, the place would bankrupt them...win/win!


13 posted on 11/15/2013 10:15:14 AM PST by gr8eman (Bandying nice with wannabe commies is over! You're either for freedom or you're not!)
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To: Navy Patriot; Gen.Blather

I believe you but then I would think the Union would want Detroit’s money under court control so they could get a sweet heart deal similar to the GM union scum. If the city isn’t allowed to go bankrupt they control who gets paid and who doesn’t. With the city manager no friend of the union I would think you would see the city pay everything but the Union related debts.

Perhaps I am conflating individual bankruptsy scenarios with whatever it is that happens when a city goes belly up.


14 posted on 11/15/2013 10:15:57 AM PST by RightOnTheBorder
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To: Gen.Blather; RightOnTheBorder; PGR88
In any bankruptcy proceeding that I've heard of, the court always asks if you have any way to increase your bottom line or if you have any assets that could be used to satisfy your obligation.

Cities/states have taxing ability. I'm sure that they don't want to exercise this ability to the extent needed to generate the funds that they need (political suicide) but they do have that option.

They also can sell city parks, community centers, athletic complexes etc. Probably not an action that most elected officials would want to be a part of, but it would be a way out.

15 posted on 11/15/2013 10:18:20 AM PST by skimbell
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To: DManA
What’s the judge going to do? Confiscate all the property in the city and hand it over to the employees?

Years ago, East St. Louis was forced to hand over the deed to City Hall to a slip-and-fall victim when the city did not have the funds to pay his judgment.


16 posted on 11/15/2013 10:18:50 AM PST by Buckeye McFrog
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To: cripplecreek

They just need some of Obama’s “stash”. /s :)


17 posted on 11/15/2013 10:19:12 AM PST by READINABLUESTATE ("If guns cause crime, there must be something wrong with mine." -Ted Nugent)
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To: skimbell

RE: Cities/states have taxing ability.

Those able to pay taxes can easily LEAVE the cities for the suburbs, or relocate to a friendlier state. Then what?


18 posted on 11/15/2013 10:20:24 AM PST by SeekAndFind
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To: Gen.Blather

And they should sell their assets. But they need a new way to go forward. You still can’t get blood from a stone.


19 posted on 11/15/2013 10:20:51 AM PST by jocon307
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To: Navy Patriot

“The problem with bankruptcy law and Rule of Law today is.....

Anything Goes!

There is no stability in law today and the more powerful can make it up as they go along.”

THIS^^^^^


20 posted on 11/15/2013 10:21:20 AM PST by RepRivFarm ("During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell)
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To: READINABLUESTATE

Today they’re just getting some of Obama’s BS. (Sebelius is in town to talk health care)


21 posted on 11/15/2013 10:21:56 AM PST by cripplecreek (REMEMBER THE RIVER RAISIN!)
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To: SeekAndFind
“Detroit will be at the mercy of its creditors in individual lawsuits spread amongst federal and state courts. That chaos alone could doom the city.”

Come on judge...throw Detroit in that thar briar patch...
22 posted on 11/15/2013 10:23:44 AM PST by rottndog ('Live Free Or Die' Ain't just words on a bumber sticker...or a tagline.)
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To: SeekAndFind

“Those able to pay taxes can easily LEAVE the cities for the suburbs, or relocate to a friendlier state”

I think they have already been through that step.


23 posted on 11/15/2013 10:24:50 AM PST by RS_Rider (I hate Illinois Nazis)
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To: skimbell

“Cities/states have taxing ability. “

Taxing more than places where people could relocate to is what got them in this mess. Also, residents are no longer paying their property taxes. The only business of note still in Detroit is GM’s headquarters. I suspect they have a sweetheart deal to stay there.


24 posted on 11/15/2013 10:25:42 AM PST by Gen.Blather
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To: alancarp

kick the can.......


25 posted on 11/15/2013 10:27:04 AM PST by is_is (VP Dad of Sgt. G - My Hero - "Sleep Well America......Your Marines have your Back")
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To: count-your-change
"Eighteen billion dollars? Don’t worry about it, it’s not due today."

The problem is that with a debt that large, the debt service will probably amount to $400-600 million a year, at least.
26 posted on 11/15/2013 10:29:24 AM PST by Steve_Seattle
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To: count-your-change
Eighteen billion dollars? Don’t worry about it, it’s not due today.

Washington, DC: Seventeen trillion dollars? Don’t worry about it, it’s not due today.

27 posted on 11/15/2013 10:32:45 AM PST by Night Hides Not (The Tea Party was the earthquake, and Chick Fil A the tsunami...100's of aftershocks to come.)
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To: Night Hides Not

Detroit is a scale model of D.C. it’s just a matter of time before they end up with similar results.


28 posted on 11/15/2013 10:35:52 AM PST by RS_Rider (I hate Illinois Nazis)
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To: SeekAndFind

Hmm... So what just might happen then is the city is dissolved, assets are turned over to the county to sell off to pay what debt they can, and then everyone else gets screwed, 0 pension, 0 city jobs, etc. Methinks the unions need to work with the city more.


29 posted on 11/15/2013 10:44:43 AM PST by Svartalfiar
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To: skimbell
Cities/states have taxing ability. I'm sure that they don't want to exercise this ability to the extent needed to generate the funds that they need (political suicide) but they do have that option.

Michigan and Detroit taxes are already so high that the population and the business base has been abandoning the city for decades. Tax increases merely exacerbate the problem. They solve nothing.

They also can sell city parks, community centers, athletic complexes etc. Probably not an action that most elected officials would want to be a part of, but it would be a way out.

Sell to whom? There are literally THOUSANDS of homes and properties in the Detroit area that can be bought for $1... and nobody is buying. Nobody wants to live in this Democrat paradise, and nobody wants to buy or build or relocate there.

Instead, LOWER taxes, and remove most of the oppressive Democrat anti-business regulations and rules, and Detroit might have a chance. Slicing the union pensions and benefits would improve those chances. Nothing else, short of a massive bailout, can possibly work.

30 posted on 11/15/2013 10:47:17 AM PST by Teacher317 (Obama is failing faster than I can lower my expectations.)
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To: RightOnTheBorder
I think you are bringing up very important points.

Theoretically and historically, the appointment of a judge, master or arbitrator has been to bring fairness and confidence into the resolution of a contract when it is impossible for all contractual obligations to be fulfilled.

Lately these positions may be held by politically biased individuals (either way), thus bringing instability back into the process.

We (and Detroit) are between a rock and a hard place.

31 posted on 11/15/2013 10:53:07 AM PST by Navy Patriot (Join the Democrats, it's not Fascism when WE do it, and the Constitution and law mean what WE say.)
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To: SeekAndFind

It should be. There is a lot of stuff to be liquidated, starting with a very valuable art collection...


32 posted on 11/15/2013 11:15:18 AM PST by Little Ray (How did I end up in this hand-basket, and why is it getting so hot?)
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To: RepRivFarm
The problem with bankruptcy law and Rule of Law today is.....

THERE ISN'T ANY!

We used to be a nation that lived by the rules of law, until the law makers and law enforcers became the biggest law-breakers. The laws are now unequally applied (I don't like that law, so I'll ignore it, and the one's I like won't apply to me..! --- Federal Government), Ignorned, and now anarchy is rearing its ugly head...

33 posted on 11/15/2013 12:36:02 PM PST by Dubh_Ghlase (Therefore, send not to know For whom the bell tolls, It tolls for thee.)
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To: READINABLUESTATE
They just need some of Obama’s “stash”. /s :)

Problem is, Obama's stash is mutating into something strange...


34 posted on 11/15/2013 12:45:04 PM PST by COBOL2Java (I'm a Christian, pro-life, pro-gun, Reaganite. The GOP hates me. Why should I vote for them?)
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To: SeekAndFind

There can be no good faith negotiations with unions because they have no good faith.


35 posted on 11/15/2013 12:48:00 PM PST by bert ((K.E. N.P. N.C. +12 ..... Travon... Felony assault and battery hate crime)
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To: SeekAndFind

“owing more than $18 billion in debt “

Can we make payments? We’ve been out of work.


36 posted on 11/15/2013 12:50:23 PM PST by AppyPappy (Obama: What did I not know and when did I not know it?)
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To: skimbell

Detroit taxes are already at the maximum state law will allow. They can’t increase taxation!


37 posted on 11/15/2013 1:23:35 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: Spktyr

They’ll have to find a way to levy user fees and non-user fees too.


38 posted on 11/15/2013 1:24:17 PM PST by GeronL (Extra Large Cheesy Over-Stuffed Hobbit)
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To: skimbell

Detroit taxes are already at the maximum state law will allow. They can’t increase taxation!


39 posted on 11/15/2013 1:24:52 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: GeronL

IIRC from their bankruptcy filing, they already have most of those set to beyond extortionate levels.


40 posted on 11/15/2013 1:25:57 PM PST by Spktyr (Overwhelmingly superior firepower and the willingness to use it is the only proven peace solution.)
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To: cripplecreek
Or it may not.

Correct. Shouldn't be, but courts are a crapshoot these law-free days. The story is just idle speculation while everybody waits for the decision. The creditors would love for the bankruptcy to be shot down, because they are counting on Lansing to bail Detroit out.

41 posted on 11/15/2013 1:30:06 PM PST by Cyber Liberty (We're At That Awkward Stage: It's too late to vote them out, too early to shoot the bastards.)
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To: jocon307
And they should sell their assets. Sell Howdy Doody? No way!
42 posted on 11/15/2013 1:32:17 PM PST by Cyber Liberty (We're At That Awkward Stage: It's too late to vote them out, too early to shoot the bastards.)
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To: SeekAndFind

“wolves rending the carcass piece by piece.”

That’s an idea. Libs want to re-introduce wolves to various areas. Crackheads v. wolves. Who will survive?


43 posted on 11/15/2013 2:41:35 PM PST by dynachrome (Vertrou in God en die Mauser)
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To: Cyber Liberty

No need to sell Howdy!

They can sell city hall and everything else by the square foot; just like: http://en.wikipedia.org/wiki/Klondike_Big_Inch_Land_Promotion

Also they could substitute mini deeds for pension checks!

May be worth something some day?


44 posted on 11/15/2013 4:07:34 PM PST by DUMBGRUNT
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