Municipal bankruptcy, like just about everything else that contains the word "municipal" or has anything to do with lawyers, is complicated. We checked in with Detroit lawyer Nathan Resnick, a municipal bankruptcy expert, and with his help we'll try to explain what an ongoing court hearing means, and where Detroit stands in its efforts to turn around its finances.
Didn't Detroit already file for bankruptcy? What's the purpose of the hearing?
Detroit did file for bankruptcy protection on July 18, a process that automatically protects the city against any impending action from creditors. But that doesn't mean it definitely gets to remain in bankruptcy.
Judge Steven Rhodes is hearing arguments about whether the city was, in fact, insolvent when it filed for bankruptcy, and whether it negotiated in good faith with its creditors.
Detroit seems pretty broke — $18 billion in debt. Why would anyone argue it shouldn't be able to file for bankruptcy?
Creditors, which include public employee unions and pension funds, say that the city did not try to negotiate with them before filing for bankruptcy.
They say that Michigan Gov. Rick Snyder appointed an emergency manager, Kevyn Orr, to take over city governance with the idea that Orr would force the city into bankruptcy rather than figure out a way to pay creditors. They've been asking the judge to look into who else [the Republican governor] considered for the emergency manager position before settling on Orr, who represented Chrysler in its 2009 bankruptcy, to prove that Snyder just wanted someone who knew a lot about bankruptcy.
