Detroit Is Eligible for Chapter 9 Bankruptcy

It’s now official, Detroit can go bankrupt.

This morning, U.S. Bankruptcy Court Judge Steven Rhodes ruled the City of Detroit is eligible for bankruptcy protection under Chapter 9 of the federal bankruptcy code.
The oral decision, released today, means that Detroit has satisfied the legal requirements for bankruptcy protection. Specifically, Detroit has proved that it is insolvent; is eligible to file under state law, and that it has negotiated in good faith with its creditors (or that such negotiations were too difficult). Additionally, Judge Rhodes said that federal bankruptcy law allows Detroit to attempt to cut pension benefits, thereby rejecting arguments that any reductions are barred by the Michigan constitution.

This can have an effect on municipal bond prices.


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