Headlines: Detroit’s bankruptcy

On Jul. 18, 2013, Detroit officially filed for bankruptcy, but it was not until December of the same year that the city was approved to enter into a Chapter 9 bankruptcy, making Detroit the largest U.S. city to have filed and been approved. Chapter 9 bankruptcy aims to “[provide] for reorganization of municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts),” according to the United States Courts. In order to be eligible for Chapter 9 bankruptcy, among other requirements, the municipality must be willing to effect a plan to adjust its debts.

The fall of Detroit did not happen overnight; it has been a decades-long process that has included white flight to the suburbs and the collapse of the auto industry, which the city heavily relied upon as a source of profit. On top of all of this, Mayor Kwame Kilpatrick was found guilty of 24 charges Feb. 2013, which included: racketeering, extortion, attempted extortion, bribery, mail fraud, wire fraud and filing falsified tax returns.

On Nov. 7, 2013, Steven Rhodes, the bankruptcy judge assigned to Detroit’s case, approved the plan suggested by the city, which aims for the city to subtract $7 billion from its total owed debt of $18 million. Some of this $7 billion would come from retirement pensions of city workers, such as police officers and firefighters. These individuals have also faced a 90 percent cut from their health benefits. However, Mr. Orr, the bankruptcy lawyer assigned to Detroit’s case by Michigan, was able to save the Detroit Institution of Arts’ (DIA) collection from being sold.

The latest step for Detroit has been the creation of the committee on Detroit’s Recovery and Michigan’s Future today, which is part of the Michigan House of Representatives. This committee is charged with rebuilding Detroit and allocating funds to the re-development of the city.


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