Judge Approves Detroit's Bankruptcy Filing And Says Pensions May Be Cut -- But He Won't Necessarily Approve Them

Michigan bankruptcy court judge Steven Rhodes
has approved Detroit’s bankruptcy as constitutional, and said cuts to pensions are permissible.

But Rhodes added that he would not approve pension cuts unless the bankruptcy plan is fair and equitable, according to Detroit Free Press reporter Nathan Bomey.

Still, he agreed with emergency manager’s Kevyn Orr’s contention that pension debts cannot be distinguished from other debts, according to the Detroit Free Press’ Brent Snavely.

Rhodes says the city entered into bankruptcy in good faith, though did not negotiate in good faith, which could in theory disqualify the filing.

However he also ruled in favour of the city’s claim that certain creditors made negotiation impracticable, according to Crain’s Amy Haimerl.

It’s the largest bankruptcy filing in history.

But he signaled Orr’s current reorganization plan is inadequate, calling “very summary in nature.”

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