Judge Steven Rhodes made the long-awaited decision – Detroit is cleared for bankruptcy.
Last July 18th, 2013, Detroit filed for bankruptcy protection, making this city the largest in our nation’s history to make this huge step. The city is more than $18 billion in debt after years of decline and financial mismanagement. It no longer has the resources to provide residents with basic police, fire and emergency services.
Under federal bankruptcy for municipalities, known as a Chapter 9, Detroit had to first prove it was eligible for protection. Earlier today, Judge Rhodes ruled Detroit is eligible to proceed with its bankruptcy.
The ruling was a huge blow to city unions and other creditors. At risk are the pension funds and other benefits for retirees. Detroit has $3.5 billion in unfunded pension obligations. Retirees could find themselves taking pennies on the dollar. Judge Rhodes issued a statement, “It will not lightly or casually exercise the power to impair pensions.” But, the judge made it clear that public employee pensions are not protected in a federal Chapter 9 bankruptcy, even if Michigan’s constitution says otherwise.
Detroit, once the fifth largest city in the United States used to be thriving and prosperous. Known as “The Motor City”, Detroit had a population of nearly 2 million people. Today, the population is just over half a million. People are leaving in droves. Detroit has the highest violent crime rate in the nation adding to the many reasons not to live there. Named the poorest city in the nation, Detroit’s unemployment is close to 50% and has the unwanted distinction as the worst city in the U.S. to find a job.
Dogs are a huge problem as well. There are over 50,000 stray dogs roaming the city. Large dens of dogs have been found living in the many vacant homes. There is widespread dog fighting. Pet owners not only left their homes, they abandoned their pets. Packs of dogs have killed other pets, bitten people and clogged animal shelters. Recently, a woman had her scalp torn off by two dogs as she was sitting on her porch. The city’s falling revenue forced cuts in animal control.
There are more than 100,000 vacant homes decaying and blighted. There’s a tremendous backlog of foreclosures, squatters have stripped homes of anything they could sell, and some have taken up residency in the vacant homes. Half the streetlights aren’t working making the neighborhoods extremely unsafe. It will take more than a major plan to put this city back on its feet.
Detroit must determine what’s necessary to invest in attracting new business and people. If the city doesn’t solve this systemic problem, they’ll just repeat their mistakes.
Today’s ruling will most probably clear the way for the numerous other cities waiting to hear the outcome of this case. Expect Oakland and San Jose California, Pontiac, Michigan and about seven other large cities to be file for bankruptcy shortly.
Keith A. Gantenbein, Jr. is a Colorado consumer advocate attorney, foreclosure defense and real estate attorney located in Denver and servicing all of Colorado. His foreclosure defense practice includes: foreclosure prevention, foreclosure assistance, loan modifications, short sales, and all other foreclosure defense legal assistance. He also handles bankruptcies, mortgage negotiations, lender liability, real estate, civil litigation, debt defense, debt harassment, contracts and landlord/tenant. If you think you will be facing debt collection, foreclosure, or are in the foreclosure process, or have had a wrongful foreclosure, contact Keith Gantenbein at (303) 618-2122 for a one-hour consultation where he will discuss your situation and go over all your options with you.