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Detroit Is Officially Eligible for Bankruptcy

And its pensions could be cut, a judge has ruled.

Associated Press

Federal Bankruptcy Judge Steven Rhodes issued a 140-page opinion today ruling that Detroit is eligible for Chapter 9 bankruptcy. Rhodes, who said that Detroit meets the insolvency requirements to be considered for bankruptcy protection, also ruled that the court will allow pensions to be cut — but that he won't necessarily approve severe cuts.

Reuters predicted yesterday a drawn-out appeals process, regardless of today’s ruling:

… the case could drag on through a possibly lengthy appeals process that could delay the city's plan to submit its plan of readjustment by the end of the month. The city's largest union has asked Rhodes to allow any appeal to proceed directly to the U.S. 6th Circuit Court of Appeals, bypassing the U.S. District Court in Detroit.

In July, Detroit became the largest U.S. city, by debt and population, to ever seek bankruptcy protection in attempt to undo $18.5 billion worth of debt.

Rhodes enumerated the city’s troubles before issuing the ruling — low crime case closures, a shrinking working population, projected negative cash flow by 2017, and a lack of basic resources for its citizens, among others. USA Today has also listed a number of the city’s more depressing statistics, including a 77 percent decline in Detroit’s property values over the past 50 years and  an overall population decline of 63 percent since 1950.

Of particular interest is the future of Detroit’s considerable art collection, including works by Matisse, van Gogh, and an original cast of Rodin’s “The Thinker,” which could be sold for revenue to be used towards debt repayment.

Top image: In this July 19, 2013, file photo, state-appointed emergency manager Kevyn Orr, right, and Michigan Gov. Rick Snyder, address reporters during a news conference in Detroit after Orr asked a federal judge for bankruptcy protection.  (Carlos Osorio/Associated Press)

This story originally ran on The Wire, an Atlantic partner site.

About the Author

  • Danielle Wiener-Bronner
    Danielle Wiener-Bronner is a former staff writer for The Wire. Her work has appeared in The Huffington Post and Reuters.