The historic Detroit bankruptcy trial came to a close on Monday when city attorneys gave closing arguments as to why U.S. Bankruptcy Judge Steven Rhodes should approve the city’s bankruptcy plan.
Judge Rhodes is expected to announce his ruling on November 7.
Closing arguments highlighted the necessity to pass the debt-cutting plan, which would free Detroit from $7 billion in debt and open up money to improve city services.
The City of Detroit filed for bankruptcy in June 2003, claiming to owe over $18 billion in debt. The bankruptcy plan was revealed earlier this year: it aims to restructure and settle debts through several different severe measures, including reducing city employee pensions.
Funding of roughly $200 million will come from Michigan taxpayers and due to an agreement to not sell off art pieces from the Detroit Institute of Arts, the city will received nearly $500 million from private and corporate donors.
City lawyer Bruce Bennett identified the greatest risks that would stop Detroit from executing the debt-cutting strategy. He stated the plan could collapse if city leaders strayed from the plan to invest $1.7 billion.
"The worst thing that could happen is if the $1.7 billion is misused or perceived to be misused," Bennett said. "Either would be an enormous problem."
Detroit filed a Chapter 9 bankruptcy case, which is similar to the proceedings of a Chapter 11 business bankruptcy case. However, a main difference is the inability to liquidate assets if Judge Rhodes does not approve the plan.
"In Chapter 9 you have to have consensus because there's really no viable alternative," said John Pottow, professor of law at the University of Michigan. "If this plan gets shot down, you can't liquidate Detroit -- so it's literally just back to the drawing board.”
If Judge Rhodes approves Detroit’s bankruptcy, Bennett believes the city can start executing the plan before Thanksgiving.
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