Detroit Could Be Officially Bankrupt Today After Judges Ruling

Detroit, bankrupt, u.s.

A federal judge is expected to announce today whether Detroit will be allowed to stay in court, more than four months after the troubled city filed for bankruptcy. Judge Steven Rhodes’ decision is one of the most crucial ones to ever be made concerning the life of an American city.

Basically, what Rhodes is deciding is whether or not Detroit meets the criteria that has been established for deciding what constitutes bankruptcy. Detroit cannot merely point to the many examples of how far the city has fallen, they must also prove that they negotiated with creditors in “good faith” or that there are substantial reasons why these negotiations were not effective.

Detroit filed for protection under Chapter 9 more than four months ago and this could be the most important development in their story so far. If Rhodes decides that Detroit has officially qualified for bankruptcy, then city officials could receive a lot of breathing room in order to begin working on the city’s new budget.

If Detroit is found to be ineligible then city officials will have to resume their talks with creditors and search for a way to make ends meet outside of courts.

To get an idea of just how difficult that could be, consider that Detroit currently owes about $18 billion in debt and has also lost more than 1 million of its inhabitants over the last 60 years.

In this scenario, Detroit will be flooded by lawsuits from its creditors.

An interesting solution has popped up however in the recent months. Detroit’s distinguished art collection is coming up for review for assets; this collection is believed to be worth in the billions of dollars region and could be put up for auction.

Although losing a city’s art collection is a dreadful consequence, when one looks at the numbers, it is hard to deny that something dreadful is going to have to happen before Detroit is back on its feet again. Here are some quick examples of how bad the situation is.

Detroit’s city offices currently have 21,000 retirees, yet only 9,700 employed workers. Detroit’s unemployment rate has actually tripled since the turn of the millennium. Although the residents have a very low level of income they are also saddled with the highest per capita tax rate in all of Michigan. Their crime rate is five times more than the national average and the biggest of large cities. Detroit citizens wait about 45 minutes longer for police to arrive than average Americans.

Somehow the loss of the city’s historic art collection is appearing less and less impossible.

Of course bankruptcy will not solve all of the problems Detroit faces either. For corporations bankruptcy usually means a clean slate to rebuild. However in Detroit that slate is the city’s architecture and roads and parks. Judge Rhodes’ decision will not magically clean these places up. The road back to restoration for Detroit is going to be a long one that may be decided in court but will show signs of reversal on the streets.

All eyes in America should be turned to the ruling on Detroit’s bankruptcy case. There has never been anything like this regarding an American city before, hopefully, there will never again.

By Nick Manai

Sources

USA Today

NPR

CNN

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