Detroit Bankruptcy Reality: Long, Costly Legal Skirmishes Likely, Experts Warn

A Chapter 9 bankruptcy filing may be inevitable for Detroit, which would be the largest U.S. city to go there. That step toward recovery wouldn't be smooth or short, people who know the process tell the Detroit Free Press.

The drastic last option would ignite a costly battle with lawyers representing creditors, city worker unions and retirees that could last for years, bankruptcy experts say.

Matt Helms quotes an Ann Arbor scholar who puts it starkly:

"It's a situation of 'Be careful what you wish for,' " said John Pottow, a University of Michigan Law School professor whose expertise is in bankruptcy law.

Helms sketches these possible scenarios:

  • Detroit could end up with legal bills in the hundreds of millions of dollars and far more cuts in its already-meager public services, meaning potentially fewer cops and firefighters and more city departments privatized or eliminated outright.
  • Workers could be terminated, and those who stay would face deep pay and benefits cuts.
  • A federal bankruptcy judge could allow the city -- or the state, through an emergency financial manager -- to rewrite labor contracts or toss them out altogether.
  • The city could find itself proposing the sale of major city assets to pay down its enormous debts. 
Read more:  Detroit Free Press

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