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Judge orders Detroit to pull bankruptcy bid

Detroit bankruptcy petition deemed unconstitutional by Michigan state judge who orders it to be withdrawn.

Last Modified: 20 Jul 2013 09:02
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A Michigan state judge has ordered that a petition by the city of Detroit to file for bankruptcy be withdrawn.

Ingham County Circuit Court Judge Rosemarie Aquilina ordered Detroit's state-appointed emergency manager, Kevyn Orr, to withdraw the federal bankruptcy petition he filed for the city on Thursday.

In submitting the suit, Detroit became the biggest city in the history of the US to file for bankruptcy.

Judge Aquilina's order said the 2012 Michigan law that allowed Governor Rick Snyder to approve the city's bankruptcy filing, violated the Michigan Constitution.

The governor lacks the power to "diminish or impair pension benefits." 

Detroit pension funds, retirees and workers filed lawsuits this month because the filing would impair retirement benefits in violation of constitutional protections for those benefits.

'Endemic blight' 

During a conference on Friday in which he defended the bankruptcy suit, Orr said that he was aware that there were 20,000 retirees and 97,000 workers who may suffer, but the majority of people in Detroit would benefit.

"There are 700,000 citizens who don't deserve a 55 minute rapid response time, who don't deserve endemic blight and crime, who don't deserve no hope and future and just continued debt over debt and borrowing," he said.

Orr acknowledged that court battles over the need for a bankruptcy filing could be protracted and difficult.

A first test in a Chapter 9 bankruptcy proceeding is whether the city has explored other reasonable options before filing, and Orr said the city would "have an eligibility fight" over the decision.

Meanwhile, ratings agency Fitch said it was unlikely that Detroit would be able to make full and timely payments on its general obligation bonds.

Al Jazeera's Ash-Har Quraishi, reporting from Detroit, said that the legal wrangling over the bankruptcy "is only beginning", as, even if the filing were deemed legal, a federal judge would still have "to evaluate and determine whether or not the city's filing is eligible in fact to restructure the debt that they have".

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Source:
Al Jazeera and agencies
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