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Detroit residents speak out in court on bankruptcy process

In a somewhat unprecedented hearing this week, Detroit residents had an opportunity to speak before the city's bankruptcy judge to air their concerns about the Chapter 9 bankruptcy filing recently made by the city. Many of the speakers argued against the city's filing and asked that it not go forwarding, citing issues like pension benefits that would impact thousands of hard working residents. 

After the hearing the judge told the city's emergency manager and the governor of Michigan to listen to the recordings so that they could understand the concerns brought by the citizens of the city. 

The city of Detroit holds more than $18 billion in debt, making its filing the largest ever municipal bankruptcy in the United States. More than $9 billion of that debt is in the form of healthcare, retirement, and pension benefits for city workers. If the city is able to restructure its debt and discharge some of it through the bankruptcy process, it is likely that former city employees would see their pensions reduced.

Residents have also raised concerns about the sweeping changes being made by the emergency manager, who is not an elected official.

The issue of ongoing benefits obligations for retired workers is one that often arises in commercial bankruptcies as well, since companies may rack up billions in debt based on their future obligations to employees. Modifying those obligations is always a difficult and complex process and as in this case can cause serious heartache on both sides.

Attorneys involved in the Detroit case have said that they are considering these issues carefully. 

Source: Reuters, "Anguish in court as Detriot residents object to bankruptcy filing," Joseph Lichterman, Sept. 19, 2013. 

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