Judge orders Detroit to Withdraw Bankruptcy Filing

Judge orders Detroit to Withdraw BankruptcyDetroit, the once auto maker capital of the U.S., filed Chapter 9 bankruptcy at the end of the day on Thursday, trying to keep the city with a dwindling population afloat. However, a Michigan Circuit Court Judge ruled on Friday that the city must withdraw its bankruptcy petition, indicating it is unconstitutional.

Of course, the situation won’t stop there and instead, the legal battles will continue in the various courts. Some experts believe the case does not have to be dropped or that a state court judge cannot interfere on federal cases. Michigan Attorney General Bill Schuette said he will immediately file an appeal to the Michigan Court of Appeals, which would ask that the circuit court’s order be blocked until the appeal is actually heard in court. Many experts say it is not clear as to whether a state court judge can legally order a party in a federal case to drop that action.

The circuit court’s order was in response to motions made by the attorneys for city retirees and their pension funds, who are arguing that Michigan’s state constitution prohibits reducing pension plans and retirement benefits, which the bankruptcy case has proposed. Ingham County Circuit Judge Rosemarie Aquilina issued the order. Reports indicate she had been prepared to file the order on Thursday in effort to block the bankruptcy filing all together, but the hearing on the motion began five minutes after the bankruptcy case had been filed.

Detroit became the largest municipality in U.S. history to seek bankruptcy protection when Kevyn Orr, Detroit emergency manager, filed the case in federal bankruptcy court on Thursday evening. Michigan Gov. Rick Snyder appointed Orr to oversee the city’s finances in the midst of recent difficulty. Snyder authorized the bankruptcy filing, according to reports. Aquilina’s order on Friday indicates that Snyder must now order Orr to withdraw the case from federal court.

The American Federation of State, County and Municipal Employees, which is a union that opposed the bankruptcy filing, praised Judge Aquilina’s ruling.  There is a provision in the state constitution that many believe prohibit cutting pensions that have been promised to employees. According to the provision, “the accrued financial benefits of each pension plan and retirement system in the state and its political subdivisions shall be a contractual obligation which shall not be diminished or impaired thereby.”

With the number of high paying automotive jobs dwindling in the city, Detroit’s population has dropped to 700,000 people, many of whom are extremely low income leaving the city to suffer in poverty. The end result has been a serious financial struggle for the city, with thousands of buildings left abandoned and violent crimes increasing. Reports indicated that in the first quarter of this year as many as one-third of the city’s street lights were not operating.

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About the author

Drew is a regular contributor covering trending topics.