Creditors file objections to Detroit bankruptcy
Aug. 19, 2013
DETROIT (AP) — Detroit's biggest employee union, retirees and even a few dozen residents filed objections Monday to the city's request for bankruptcy protection, the largest municipal filing in U.S. history and a move aimed at wiping away billions of dollars in debt.
The filing by the American Federation of State, County & Municipal Employees Michigan Council 25 also came before expected objections from two city pension systems, bond holders, banks and others who hope to convince federal Judge Steven Rhodes not to allow the bankruptcy petition by Detroit emergency manager Kevyn Orr.
Since 1954, 29 of 62 municipal bankruptcies pursued in the U.S. have been dismissed.
Rhodes set Monday as the eligibility objection deadline. Attorneys for large creditors have until just before midnight to file objections electronically. Individual creditors who fear losing their pensions and paying more for health care began filing objections Monday in person at the court.
By early Monday evening, more than 100 objections had been filed including those made by several smaller city unions.
The AFSCME, the AFL-CIO and city retirees claim in their objection that Michigan's emergency manager law — which gives Orr his authority — impairs vested pension rights violating the state Constitution. They also claim Orr did not negotiate in good faith with city creditors and that he has not yet proved Detroit is insolvent.
Orr, hired in March by the state to fix Detroit's finances, has said there are no other options for Detroit. The city's budget deficit has hovered near or above $300 million during the past few years,
He filed for bankruptcy on July 18, claiming the city has at least $18 billion in liabilities, from underfunded pensions and health care costs to bonds that lack city revenue to be paid off.
Orr also stopped payment on $2.5 billion in debt in June.
Detroit has about 21,000 retired workers who are owed benefits, with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.
Mary Dugans, one of those retirees, filed an individual objection Monday.
"I need my pension for basic human needs," she wrote in her one-page filing. "Additionally, I'm 80 years old with age related medical conditions. Therefore, I have to pay for medical co-pays as well as for prescribed medications. Please consider my situation as you approach this important matter. Thanks."
Monday's deadline for objections drew protesters outside federal court in Detroit.
Some in a group of about 30 people amassed outside the building said in their filings that there are no legal provisions that gave Orr authority to file the bankruptcy petition and that it was done without consent of the city's elected representatives.
"Hopefully, we'll have the opportunity to argue why Detroit should not be allowed to go into bankruptcy," said the Rev. Charles Williams II, Michigan chapter president of the National Action Network, a grassroots organization that opposes the state's emergency law.
Some bankruptcy experts say it can be difficult for objections to stop a bankruptcy, but they have proved successful in a few cases. Boise County, Idaho, failed to go into bankruptcy after objections that the county was not insolvent. Harrisburg, Pennsylvania, failed the garner protection because its bankruptcy filing was not authorized by state law.