Is Detroit eligible for bankruptcy? Crucial trial starts today

Oct 23, 2013

A trial to determine Detroit’s fate in municipal bankruptcy starts Wednesday.

Judge Steven Rhodes will hear arguments from city lawyers about why Detroit qualifies for Chapter 9 protection.

University of Michigan law professor and bankruptcy expert John Pottow says some city creditors will argue that Detroit’s bankruptcy filing was pre-determined--and there was no good-faith bargaining process, as the federal bankruptcy code requires.

“There’s sort of a theme emerging—that the fix was in, and he [Governor Snyder] was going to file bankruptcy all along for the city,” Pottow says.

Governor Snyder has been subpoenaed to testify in the case. Detroit emergency manager Kevyn Orr is also expected to take the stand.

Pottow says the trial will likely take days—and bankruptcy court Judge Steven Rhodes will likely proceed with caution in a complex case.

“All the i’s are going to be dotted, and all the t’s are going to be crossed,” Pottow says.

If Rhodes finds Detroit is eligible for Chapter 9, the case would proceed through bankruptcy court. City lawyers say they would present a plan of adjustment—outlining how Detroit plans to deal with its debts—by the end of the year.