Detroit filed bankruptcy, what does this mean? Detroit has chosen to file a Chapter 9 bankruptcy in order to eliminate, reduce and/or renegotiate its debt with creditors. Although many still hear bankruptcy and become frightened, it is better for Detroit to consolidate the lawsuits, creditors and attorneys all in one room, courthouse, then multiple courthouses, judges and decisions. The very purpose of the bankruptcy court is to create an efficient and uniform ruling and repayment of debt.
Detroit filed bankruptcy, what does this mean to you? Detroit may be the blueprint of how the Bankruptcy Court treats pensions, city workers and creditors. Basically, the court will determine who gets paid something and who gets paid nothing. Many cities have similar issues as Detroit, primarily too much debt, to many pension payments and a decrease in the population to support the tax base. Retirees want to ensure that they continue to receive their pension, city workers want to ensure that they have jobs and creditors want to ensure that their debt is honored. If the bankruptcy court decides to eliminate the Bank debt/loans; banks will be less likely to provide funds to cities in the future. Elimination of credit and/or loans means many projects won’t be funded and more than likely the hardest pressed projects (school funding, library, food programs, day care, roads etc) will suffer the most. Pensions are the other big concerns. If the bankruptcy judge decides to allow Detroit to reduce or re negotiate pensions then many seniors will endure a huge financial hardship. Banks have already stated that they will not forgive the debt and don’t look to the Government to bail out Detroit.
It is basically Detroit against everybody; however filing Bankruptcy is the only possible solution.