After intense negotiations and a court hearing, Detroit has been cleared to exit bankruptcy. This municipal bankruptcy will eliminate $7 billion of debt. Also, a plan has been created for the city to invest $1.7 billion in its own city services, such as buying equipment for its fire department and fixing up buildings according to a November 7, 2014 New York Times article.
There were several important conditions in Detroitâ€™s bankruptcy. For example, some creditors of Detroit were bondholders. One company, after negotiations, agreed to take a large loss on their investment and only require a payback of 14 cents on the dollar invested in Detroit. Another important point of the bankruptcy was pension cuts based on a lower return on investment in pension funds. Also, city workers took pay cuts and agreed to higher healthcare payments.
Other cities, including some in California and even a county in Alabama have filed for Chapter 9 bankruptcy. Not all of these municipalities have exited bankruptcy, but they have all taken significantly longer than Detroit, which spent 16 months in bankruptcy. This was surprising, as Detroitâ€™s bankruptcy was the largest municipal bankruptcy in the United States to date. However, some fear that the city will face difficulty in the years to come in terms of finance. There is little investment in the city, and the population numbers have been on a constant decline. Only time will tell if the city and region that once employed many in the automotive industry will host a renaissance.
If you are facing personal financial trouble, whether you are facing foreclosure or have a mountain of credit card debt, then you should speak to an attorney. Chapter 7 bankruptcy, or a liquidation bankruptcy, can wipe out most of your debts. Jayson Lutzky is a Bronx, New York personal bankruptcy attorney with over 31 years of legal experience. To set up a free, in-person consultation, call 718-329-9500 or visit www.MyNewYorkCityLawyer.com.