Federal Judge Says Detroit Bankruptcy Filing Is Legal



Federal bankruptcy judge Steven Rhodes will now allow Detroit’s chapter 9 filing to proceed after hearing arguments from both sides.
Both pension and city lawyers took to federal court today before bankruptcy judge Steven Rhodes for a historic argument that the world is closely watching centering on the legality of Detroit emergency manager Kevyn Orr filing for chapter 9 bankruptcy.
Rhodes said he was granting the request because it was in the interest of the public and called it “the most important factor of all.”
Earlier in court this morning, Jones Day super lawyer Heather Lennox, representing the City of Detroit, and Kevyn Orr argued that the city’s decision to seek bankruptcy in federal court was the right move because state courts have no jurisdiction to hear the bankruptcy case.
Orr has long argued, and in an exclusive interview this week, said the city’s pension fund is under-funded by $3.5 billion and that creditors are owed $11.5 billion.
Lennox’s argument has been part of the conversation regarding the city’s filing of chapter 9 because some have contended that the benefits of pensioners are protected in the Michigan Constitution, while other experts disagreed, saying the federal bankruptcy code supersedes state law.

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