Vallejo Heads for Another Bankruptcy; Oakland, LA, San Diego Doomed as Well

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Vallejo Heads for Another Bankruptcy; Oakland, LA, San Diego Doomed as Well

Opinion analysis: Justices stick with Bankruptcy Code text, rejecting Ninth Circuit’s creative punishment of lying bankrupt

As quick off the mark as usual, Justice Scalia’s unanimous opinion for the Court in Law v. Siegel was the Court’s first opinion from the January argument calendar and his fourth opinion (more than any other Justice) of the 2013 Term.

Justice Scalia delivers opinion (Art Lien)

The case involves a bankrupt (Law) who tried to keep money from his creditors by claiming that his home was subject to a fictional lien.  Law’s activity in support of this fiction was remarkable; as the Court’s opinion notes, it extended (according to the courts below) to the filing of fictitious pleadings that he forged in the name of the fictitious lienholder.  By the end of the day, the trustee in the bankruptcy proceeding (Siegel) spent several hundred thousand dollars proving that Law’s claim was wholly fabricated. Outraged by the conduct, the bankruptcy court (following established Ninth Circuit precedent) held that the trustee could collect the expenses of that litigation out of the funds Law received from the sale of his homestead. Ordinarily, those funds would have been exempt under California’s homestead exemption (which differs in no material way from the homestead exemptions of every other state).

My posts on the briefs and on the argument suggested that the case presented the Justices with a stark choice between applying the plain language of the Bankruptcy Code (which would require it to reverse the Ninth Circuit), and giving in to the understandable impulse to affirm the capacity of the bankruptcy courts to dole out stern punishment for the remarkably deplorable conduct at issue here. The quick and unanimous reversal suggests that the Justices whose comments at the argument expressed so much outrage at Law’s conduct could not, on reflection, find a colorable basis for upholding the Ninth Circuit.

The Court’s brisk and workmanlike statutory analysis reads like the answer a talented student would give to a relatively simple exam question. The absence of qualifications or quibbles in its description of the relevant principles make it just the kind of opinion that is likely to be cited frequently in future briefs to the Court. The basic argument for punishing Law is that Bankruptcy Code § 105’s grant of general authority to “issue any order . . . that is necessary or appropriate to carry out the provisions of [the Bankruptcy Code]” is so general that it should be read to permit the sanction imposed in this case.  The fundamental problem, which Law could not overcome, is that the Code could hardly be any clearer in stating that bankruptcy courts cannot take exempt property (the proceeds of Law’s homestead) to fund administrative expenses (like the trustee’s litigation costs). Because the Court concluded that the order in question “contravened” the exemption rules, the Court found the order impermissible.

Among other things, the Court pointed to the provision in Section 522(k) stating that exempt assets are “not liable for the payment of any administrative expense.” The trustee’s litigation costs have to be administrative expenses for bankruptcy purposes, because they were incurred by the trustee litigating on behalf the estate; if they weren’t administrative expenses, they wouldn’t be reimbursable at all.  The suggestion that administrative expenses should have a narrower meaning in Section 522(k) than in the framework that makes those expenses an obligation of the estate was dismissed out of hand.

Nor did the Court find any substantial merit in the idea that the bankruptcy court has inherent power to deny an exemption as a sanction for misconduct.  For one thing, the courts in this case didn’t in fact deny the exemption – they granted the exemption and then “surcharged” it (the Ninth Circuit’s euphemism for confiscation). But more generally (and this part of the opinion probably will make it into future casebooks), the Court denied bankruptcy courts any authority to “withhold exemptions based on whatever considerations they deem appropriate.”  The “Code’s meticulous—not to say mind-numbingly detailed—enumeration of exemptions confirms that courts are not authorized to create additional exemptions.”

Finally, the Court rejected Law’s reliance (seconded by the United States Trustee) on its 2007 decision in Marrama v. Citizens Bank.  To be sure, the Marrama Court did have to work very hard to find a statutory basis for refusing to allow the debtor in that case to convert a bankruptcy case from Chapter 7 to Chapter 13. The easy answer for Justice Scalia would have been that he dissented from Marrama’s creative statutory construction in the first place.  But of course, with Justices Kennedy, Ginsburg, and Breyer still on the Court from the Marrama majority, he couldn’t get a unanimous Court for that explanation. So instead he summarized the statutory analysis of Marrama as colorable on its own facts but not so untethered to reality as to justify the statutory distortion that would be necessary to affirm the Ninth Circuit.

It’s a refreshingly reassuring experience to read an opinion for a unanimous Court that blithely upholds a result that most of the Justices must find distasteful. It just goes to show, even to the cynical, that legal rules, in fact, every now and then, constrain the Justices’ actions.

PLAIN LANGUAGE: When someone files for bankruptcy, ordinarily the courts cannot take the individual’s home, because it is “exempt” from the bankruptcy.  The Court in this case held that the home remains exempt even if the individual’s flagrantly deceptive conduct results in hundreds of thousands of dollars of litigation.

In association with Bloomberg Law

SCOTUSblog

Opinion analysis: Justices stick with Bankruptcy Code text, rejecting Ninth Circuit’s creative punishment of lying bankrupt

​Rome days away from bankruptcy

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​Rome days away from bankruptcy

UPDATE 1-Suntech to challenge U.S. bondholders" bankruptcy push

UPDATE 1-Suntech to challenge U.S. bondholders" bankruptcy push
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Thu Oct 31, 2013 11:05am EDT





* Four U.S. bondholders seek Chapter 7 proceedings against Suntech




* Suntech has until Nov. 6 to respond to the filing




Oct 31 (Reuters) – Chinese solar panel maker Suntech Power Holdings Co Ltd said it intended to contest a bankruptcy petition filed against it in the United States by some bondholders.




U.S.-listed Suntech’s shares fell as much as 8 percent to a low of $ 1.30.




A group of four U.S. bondholders, holding about $ 1.6 million of the debt-laden company’s 3 percent convertible senior notes due 2013, made the filing under Chapter 7 of the U.S. Bankruptcy Code.




In a Chapter 7 bankruptcy, or liquidation, a trustee is appointed to oversee the sale of a company’s assets to raise money to repay creditors.




Suntech defaulted in March on a principal payment on its $ 541 million convertible bonds, prompting its main manufacturing unit, Wuxi Suntech, to file for bankruptcy protection in China five days later.




Suntech, once the largest panel maker in the world, has not been able to recover after a global glut of panels depressed selling prices and the withdrawal of subsidies in top European solar markets. Its stock price has collapsed since touching a life-high of $ 86.28 in December 2007.




One of the four U.S. bondholders is Trondheim Capital Partners LP. Colin Peterson, a managing director at the distressed-debt firm, told Reuters in March that he would sue Suntech if it failed to make the payments.




Analysts have long warned that Suntech’s overseas bondholders had slim chances of recovering their money, though the company has continued to enjoy government support while under bankruptcy proceedings in China.




Suntech said on Wednesday that Wuxi Guolian, the investment arm of the city government of Wuxi where the company is headquartered, could invest at least $ 150 million to support a restructuring of the company.




The closely watched restructuring is moving forward with China’s Shunfeng Photovoltaic International Ltd potentially buying Wuxi Suntech, according to sources.




Suntech has repeatedly struck deals with its U.S. bondholders to defer payment on the $ 541 million loan, but the company said on Thursday that a judgment had been ruled in favor of certain bondholders with respect to repayment of their notes.




Suntech said it had until Nov. 6 to respond to the Chapter 7 filing made in the U.S. Bankruptcy Court in the Southern District of New York.




Suntech shares were down 4.3 percent at $ 1.24 in late morning trading on the New York Stock Exchange. The stock price has collapsed since touching a life-high of $ 86.28 in December 2007.





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Reuters: Bonds News

Read more about UPDATE 1-Suntech to challenge U.S. bondholders" bankruptcy push and other interesting subjects concerning Bonds at TheDailyNewsReport.com

U.S. Treasury official named lead on Detroit bankruptcy

Downtown Detroit is seen looking south on Grand River Avenue in Detroit, Michigan July 25, 2013. Photo taken July 25, 2013.

Credit: Reuters/Rebecca Cook

Reuters: Politics

U.S. Treasury official named lead on Detroit bankruptcy

VIDEO: Judge To Rule On San Bernardino Bankruptcy, Pensions Loom

The city of San Bernardino is expected to learn if it is eligible for bankruptcy protection, despite the opposition of California’s powerful public pension system. The case is an important test for the federal law used by Detroit and other U.S. cities burdened by pension payment costs.

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VIDEO: Judge To Rule On San Bernardino Bankruptcy, Pensions Loom

Judge freezes challenges to Detroit bankruptcy

Protesters march outside the Theodore Levin United States Courthouse, in Detroit, Wednesday, July 24, 2013. A federal judge agreed with Detroit on Wednesday and stopped any lawsuits challenging the city’s bankruptcy, declaring his courtroom the exclusive venue for legal action in the largest filing by a local government in U.S. history. (AP Photo/Paul Sancya)

Protesters march outside the Theodore Levin United States Courthouse, in Detroit, Wednesday, July 24, 2013. A federal judge agreed with Detroit on Wednesday and stopped any lawsuits challenging the city’s bankruptcy, declaring his courtroom the exclusive venue for legal action in the largest filing by a local government in U.S. history. (AP Photo/Paul Sancya)

Firefighters protest outside the Theodore Levin United States Courthouse, in Detroit, Wednesday, July 24, 2013. A lawyer for Detroit argued Wednesday that the city would be “irreparably harmed” if lawsuits challenging a multibillion-dollar bankruptcy are allowed to go forward, the first dispute in the largest municipal bankruptcy in U.S. history. Retirees anxious about their pensions have won favorable rulings from an Ingham County judge that could slow down or even derail the bankruptcy filed just last week.(AP Photo/Paul Sancya)

Protesters carry a sign outside the Levin Federal Courthouse in Detroit, Wednesday, July 24, 2013. Detroit’s bankruptcy is hitting a courtroom for the first time as a judge considers what to do with challenges from retirees who claim their pensions are protected by the Michigan Constitution.(AP Photo/Paul Sancya)

Firefighters protest outside the Theodore Levin United States Courthouse, in Detroit, Wednesday, July 24, 2013. Detroit’s bankruptcy is hitting a courtroom for the first time as a judge considers what to do with challenges from retirees who claim their pensions are protected by the Michigan Constitution. (AP Photo/Paul Sancya)

Protesters carry a sign outside the Levin Federal Courthouse in Detroit, Wednesday, July 24, 2013. Detroit’s bankruptcy is hitting a courtroom for the first time as a judge considers what to do with challenges from retirees who claim their pensions are protected by the Michigan Constitution.(AP Photo/Paul Sancya)

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DETROIT (AP) — A federal judge on Wednesday swept aside lawsuits challenging Detroit’s bankruptcy, settling the first major dispute in the scramble to get a leg up just days after the largest filing by a local government in U.S. history.

After two hours of arguments, U.S. Bankruptcy Judge Steven Rhodes made clear he’s in charge. He granted Detroit’s request to put a permanent freeze on three lawsuits filed in Ingham County, including another judge’s extraordinary decision that Gov. Rick Snyder trampled the Michigan Constitution and acted illegally in approving the Chapter 9 filing.

That ruling and others had threatened to derail the bankruptcy.

Questions about Detroit’s eligibility to turn itself around through bankruptcy “are within this court’s exclusive jurisdiction,” Rhodes said.

He said nothing in federal law or the U.S. Constitution gives a state court a dual role. It was a victory for Detroit, which had warned that it would be “irreparably harmed” if it had to deal with lawsuits in state courts while trying to restructure $ 18 billion in debt with thousands of creditors.

“Widespread litigation … can only confuse the parties, confuse the case and create serious barriers,” attorney Heather Lennox told the judge.

Creditors “will have their day in court” — bankruptcy court, she said.

The courtroom was jammed with lawyers representing creditors as well as rank-and-file city employees and retirees eager to know the outcome. Some wore T-shirts that said, “Detroit vs. Everybody.”

Detroit emergency manager Kevyn Orr, who recommended bankruptcy, sat in the front row for part of the hearing. Outside the courthouse, protesters held a banner with a message for Wall Street: “Cancel Detroit’s debt. The banks owe us.”

Detroit has about 21,000 retirees — police, firefighters, City Hall clerks, trash haulers, bus drivers — who are owed money and fear their income is at risk in a bankruptcy. Orr has said the city has underfunded obligations of about $ 3.5 billion for pensions and $ 5.7 billion for retiree health coverage.

The Michigan Constitution states that public pensions “shall not be diminished or impaired.” An Ingham County judge cited that provision last week when she ordered Snyder and other officials to take no further action in the Detroit bankruptcy.

Sharon Levine, an attorney for a union that represents city workers, urged the bankruptcy judge to let those lawsuits run their course. She said there’s no federal insurance for public pensions once they’re broken, unlike pensions at private employers.

“Our members who participate at most are at or below $ 19,000 a year. There is no safety net,” Levine said.

Although Rhodes ruled in favor of Detroit, he said opponents will have opportunities to make the same arguments in his court in the future. He has many critical issues ahead, including whether Detroit really is broke and entitled to greatly reduce or wipe out debts. The process could last a year or more.

Michael Nicholson, general counsel for the United Auto Workers, was disappointed with Rhodes’ decision.

“State courts have the power to decide what the state constitution means,” Nicholson said outside court. “In our view, retirees’ rights are a matter of Michigan constitutional rights.”

Snyder signed off on Detroit’s bankruptcy on July 18, calling it the only practical choice for a city whose population has plummeted to 700,000 from 1.8 million decades ago. Detroit’s long-term debt has become an urban millstone.

The governor called Rhodes’ decision “excellent” and said it allows one place to settle the city’s finances.

In March, Snyder appointed Orr, a bankruptcy expert, as Detroit’s emergency manager. Orr had sweeping powers to reshape city finances but recommended bankruptcy after failing to reach any significant deals with creditors, including Wall Street bankers and Detroit pension funds. Many of those creditors, however, accused him of being inflexible and believe bankruptcy always was the plan.

Detroit has more than double the population of Stockton, Calif., which had been the largest U.S. city to file for bankruptcy before Detroit trumped it last week.

Detroit fire Lt. James Edwards, 43, attended the court hearing Wednesday with some anxiety.

“It seems as though we’re going to end up being the patsy for a lot of bad decisions that have been made over the years,” said the 18-year department veteran, referring to his future pension. “You base your life decisions on promises made to you when you came on the job.”

Belinda Myers-Florence, 59, said her pension is her only income after working nearly 36 years for Detroit, from bus driver to social services. She can’t believe she may lose money because of the bankruptcy.

“It’s going to have to hit me in the face,” she said. “I just can’t believe that they can go that way.”

___

Follow Ed White at http://twitter.com/edwhiteap

Associated Press

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

U.S. Headlines

Judge freezes challenges to Detroit bankruptcy

Detroit bankruptcy case heads to Wednesday hearing on challenges

DETROIT (Reuters) – Labor unions trying to stop Detroit from cutting pensions filed a new challenge to the city in bankruptcy court as the federal judge overseeing the case said he would hear arguments on Wednesday.

Reuters: Top News

Detroit bankruptcy case heads to Wednesday hearing on challenges

Long-suffering Detroit finally turns to bankruptcy

In this July 17, 2013, aerial photo is the city of Detroit. On Thursday, July 18, 2013, Detroit became the largest city in U.S. history to file for bankruptcy when State-appointed emergency manager Kevyn Orr asked a federal judge for municipal bankruptcy protection. (AP Photo/Paul Sancya)

In this July 17, 2013, aerial photo is the city of Detroit. On Thursday, July 18, 2013, Detroit became the largest city in U.S. history to file for bankruptcy when State-appointed emergency manager Kevyn Orr asked a federal judge for municipal bankruptcy protection. (AP Photo/Paul Sancya)

In this July 12, 2013, photo an Outsource to Detroit banner from Galaxe.Solutions is seen on a Detroit building. After several weeks of slow-moving talks, only one deal has been reached between the state-appointed emergency manger hired to fix Detroit’s finances and the more than 50 creditors, two public pension funds and unions jockeying for a piece of the billions of dollars the city owes them. The pace is frustrating for some, who are balking at the 10 cents on a dollar offered by bankruptcy attorney Kevyn Orr. (AP Photo/Carlos Osorio)

FILE – In this March 14, 2013, file photo state-appointed emergency manager Kevyn Orr speaks in Detroit. Orr on Thursday, July 18, 2013, asked a federal judge permission to place Detroit into Chapter 9 bankruptcy protection. (AP Photo/Paul Sancya)

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DETROIT (AP) — At the height of its industrial power, Detroit was an irrepressible engine of the American economy, offering well-paying jobs, a gateway to the middle class for generations of autoworkers and affordable vehicles that put the world on wheels.

But by Thursday, the once-mighty symbol of the nation’s manufacturing might had fallen from that pinnacle into financial ruin, becoming the biggest U.S. city ever to file for bankruptcy — the result of a long, slow decline in population and auto manufacturing.

Although the filing had been feared for months, the path that lay ahead was still uncertain. Bankruptcy could mean laying off employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed.

Kevin Frederick, an admissions representative for a local career training school, called the step “an embarrassment.”

“I guess we have to take a couple of steps backward to move forward,” Frederick said.

Now city and state leaders must confront the challenge of rebuilding Detroit’s broken budget in as little as a year.

Kevyn Orr, a bankruptcy expert hired by the state in March to stop Detroit’s fiscal free-fall, said Detroit would continue paying its bills and employees.

But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild’s San Francisco office, “they don’t have to pay anyone they don’t want to. And no one can sue them.”

The city’s woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers starting building suburbs that lured away workers and businesses.

Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn’t control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.

Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

The result is a metropolis where whole neighborhoods are practically deserted and basic services cut off in places. Looming over the crumbling landscape is a budget deficit believed to be more than $ 380 million and long-term debt that could be as much as $ 20 billion.

In recent months, the city has relied on state-backed bond money to meet payroll for its 10,000 employees.

Orr made the filing in federal bankruptcy court under Chapter 9, the bankruptcy system for cities and counties.

He was unable to persuade a host of creditors, unions and pension boards to take pennies on the dollar to help with the city’s massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

Orr said Thursday that he “bent over backward” to work with creditors, rejecting criticism that he was too rigid. “Anybody who takes that position just hasn’t been listening.”

The bankruptcy could last through summer or fall 2014, which coincides with the end of Orr’s 18-month appointment, he said.

Gov. Rick Snyder, who called bankruptcy the “one feasible path,” determined earlier this year that Detroit was in a financial emergency and without a plan for improvement. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr.

Creditors and public servants “deserve to know what promises the city can and will keep,” Snyder wrote in a letter that was part of the filing. “The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.”

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his tenure in Detroit that bankruptcy was a road he preferred to avoid.

Some city workers and retirement systems filed lawsuits to prevent Snyder from approving Orr’s bankruptcy request, said Detroit-area turnaround specialist James McTevia.

They have argued that bankruptcy could change pension and retiree benefits, which are guaranteed under state law.

Others are concerned that a bankrupt Detroit will cause businesses large and small to reconsider their operations in the city. But General Motors does not anticipate any impact to its daily operations, the automaker said Thursday in a statement.

Detroit has more than double the population of the Northern California community of Stockton, Calif., which until Detroit had been the largest U.S. city ever to file for bankruptcy when it did so in June 2012.

Before Detroit, the largest municipal bankruptcy filing had involved Jefferson County, Ala., which was more than $ 4 billion in debt when it filed in 2011. Another recent city to have filed for bankruptcy was San Bernardino, Calif., which took that route in August 2012 after learning it had a $ 46 million deficit.

Associated Press

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Headlines

Long-suffering Detroit finally turns to bankruptcy

Long-suffering Detroit finally turns to bankruptcy

In this July 17, 2013, aerial photo is the city of Detroit. On Thursday, July 18, 2013, Detroit became the largest city in U.S. history to file for bankruptcy when State-appointed emergency manager Kevyn Orr asked a federal judge for municipal bankruptcy protection. (AP Photo/Paul Sancya)

In this July 17, 2013, aerial photo is the city of Detroit. On Thursday, July 18, 2013, Detroit became the largest city in U.S. history to file for bankruptcy when State-appointed emergency manager Kevyn Orr asked a federal judge for municipal bankruptcy protection. (AP Photo/Paul Sancya)

In this July 12, 2013, photo an Outsource to Detroit banner from Galaxe.Solutions is seen on a Detroit building. After several weeks of slow-moving talks, only one deal has been reached between the state-appointed emergency manger hired to fix Detroit’s finances and the more than 50 creditors, two public pension funds and unions jockeying for a piece of the billions of dollars the city owes them. The pace is frustrating for some, who are balking at the 10 cents on a dollar offered by bankruptcy attorney Kevyn Orr. (AP Photo/Carlos Osorio)

FILE – In this March 14, 2013, file photo state-appointed emergency manager Kevyn Orr speaks in Detroit. Orr on Thursday, July 18, 2013, asked a federal judge permission to place Detroit into Chapter 9 bankruptcy protection. (AP Photo/Paul Sancya)

Buy AP Photo Reprints

DETROIT (AP) — At the height of its industrial power, Detroit was an irrepressible engine of the American economy, offering well-paying jobs, a gateway to the middle class for generations of autoworkers and affordable vehicles that put the world on wheels.

But by Thursday, the once-mighty symbol of the nation’s manufacturing might had fallen from that pinnacle into financial ruin, becoming the biggest U.S. city ever to file for bankruptcy — the result of a long, slow decline in population and auto manufacturing.

Although the filing had been feared for months, the path that lay ahead was still uncertain. Bankruptcy could mean laying off employees, selling off assets, raising fees and scaling back basic services such as trash collection and snow plowing, which have already been slashed.

Kevin Frederick, an admissions representative for a local career training school, called the step “an embarrassment.”

“I guess we have to take a couple of steps backward to move forward,” Frederick said.

Now city and state leaders must confront the challenge of rebuilding Detroit’s broken budget in as little as a year.

Kevyn Orr, a bankruptcy expert hired by the state in March to stop Detroit’s fiscal free-fall, said Detroit would continue paying its bills and employees.

But, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild’s San Francisco office, “they don’t have to pay anyone they don’t want to. And no one can sue them.”

The city’s woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers starting building suburbs that lured away workers and businesses.

Then beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn’t control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the auto industry melted down in 2009, only a few factories from GM and Chrysler were left. GM is the only one with headquarters in Detroit, though it has huge research and testing centers with thousands of jobs outside the city.

Detroit lost a quarter-million residents between 2000 and 2010. Today, the population struggles to stay above 700,000.

The result is a metropolis where whole neighborhoods are practically deserted and basic services cut off in places. Looming over the crumbling landscape is a budget deficit believed to be more than $ 380 million and long-term debt that could be as much as $ 20 billion.

In recent months, the city has relied on state-backed bond money to meet payroll for its 10,000 employees.

Orr made the filing in federal bankruptcy court under Chapter 9, the bankruptcy system for cities and counties.

He was unable to persuade a host of creditors, unions and pension boards to take pennies on the dollar to help with the city’s massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

Orr said Thursday that he “bent over backward” to work with creditors, rejecting criticism that he was too rigid. “Anybody who takes that position just hasn’t been listening.”

The bankruptcy could last through summer or fall 2014, which coincides with the end of Orr’s 18-month appointment, he said.

Gov. Rick Snyder, who called bankruptcy the “one feasible path,” determined earlier this year that Detroit was in a financial emergency and without a plan for improvement. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr.

Creditors and public servants “deserve to know what promises the city can and will keep,” Snyder wrote in a letter that was part of the filing. “The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.”

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his tenure in Detroit that bankruptcy was a road he preferred to avoid.

Some city workers and retirement systems filed lawsuits to prevent Snyder from approving Orr’s bankruptcy request, said Detroit-area turnaround specialist James McTevia.

They have argued that bankruptcy could change pension and retiree benefits, which are guaranteed under state law.

Others are concerned that a bankrupt Detroit will cause businesses large and small to reconsider their operations in the city. But General Motors does not anticipate any impact to its daily operations, the automaker said Thursday in a statement.

Detroit has more than double the population of the Northern California community of Stockton, Calif., which until Detroit had been the largest U.S. city ever to file for bankruptcy when it did so in June 2012.

Before Detroit, the largest municipal bankruptcy filing had involved Jefferson County, Ala., which was more than $ 4 billion in debt when it filed in 2011. Another recent city to have filed for bankruptcy was San Bernardino, Calif., which took that route in August 2012 after learning it had a $ 46 million deficit.

Associated Press

Copyright 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Headlines

Long-suffering Detroit finally turns to bankruptcy

A Brooklyn Bankruptcy Attorney Might Give A Fresh Financial Start

A Brooklyn bankruptcy lawyer specializes in bankruptcy cases. This kind of case usually enables debtors a fresh financial start and a brighter future without large amounts of debt being owed. Bankruptcy is meant to aid debtors who have limited income and may not be able to repay all of the debts incurred within a reasonable period of time. When debts keep mounting up and the person does not have the financial resources required to make the required payments then radical measures might be required.

Recently the bankruptcy regulations in America have been changed to ensure that fraud and bankruptcy cases that are not reputable are lessened. The laws incorporate a means test that must be passed if the person likes to file for chapter 7 bankruptcy, which frequently removes most if not all of the debts that an individual has. Chapter 13 involves reorganization of the financial debt and a particular payment plan that may cover up to 5 years. Just after the payment plan is finished any remaining debts are typically discharged and eliminated with this kind of bankruptcy case.

The experience that a Brooklyn bankruptcy attorney has regarding the bankruptcy rules and court process could be tremendous. The difficult procedure and complex guidelines can make bankruptcy cases extremely tough. Any problem, regardless how little or insignificant, could case the bankruptcy case to be dismissed and this may mean the loss of any filing charges and several other court costs.

If a fresh monetary start is required or the amount of debt seems excessive then declaring bankruptcy may be the most effective option in some instances. Many individuals see bankruptcy as a plan to get away from financial debt that is legally owed but that\’s not really what this procedure is all about. Numerous debtors have no monetary training and get in over their heads financially due to unexpected situation like a serious illness or injury or the loss of employment.

Every individual may have different debts, different assets, and unique situations that need special consideration.

A bankruptcy lawyer can provide tips and guidance based on the specific facts and individual condition.

A Brooklyn Bankruptcy Attorney Might Give A Fresh Financial Start

A Brooklyn Bankruptcy Attorney Might Give A Fresh Financial Start

A Brooklyn bankruptcy lawyer specializes in bankruptcy cases. This kind of case usually enables debtors a fresh financial start and a brighter future without large amounts of debt being owed. Bankruptcy is meant to aid debtors who have limited income and may not be able to repay all of the debts incurred within a reasonable period of time. When debts keep mounting up and the person does not have the financial resources required to make the required payments then radical measures might be required.

Recently the bankruptcy regulations in America have been changed to ensure that fraud and bankruptcy cases that are not reputable are lessened. The laws incorporate a means test that must be passed if the person likes to file for chapter 7 bankruptcy, which frequently removes most if not all of the debts that an individual has. Chapter 13 involves reorganization of the financial debt and a particular payment plan that may cover up to 5 years. Just after the payment plan is finished any remaining debts are typically discharged and eliminated with this kind of bankruptcy case.

The experience that a Brooklyn bankruptcy attorney has regarding the bankruptcy rules and court process could be tremendous. The difficult procedure and complex guidelines can make bankruptcy cases extremely tough. Any problem, regardless how little or insignificant, could case the bankruptcy case to be dismissed and this may mean the loss of any filing charges and several other court costs.

If a fresh monetary start is required or the amount of debt seems excessive then declaring bankruptcy may be the most effective option in some instances. Many individuals see bankruptcy as a plan to get away from financial debt that is legally owed but that\’s not really what this procedure is all about. Numerous debtors have no monetary training and get in over their heads financially due to unexpected situation like a serious illness or injury or the loss of employment.

Every individual may have different debts, different assets, and unique situations that need special consideration.

A bankruptcy lawyer can provide tips and guidance based on the specific facts and individual condition.

A Brooklyn Bankruptcy Attorney Might Give A Fresh Financial Start

Half of Detroit Properties Have Not Paid Taxes; Update on Detroit Bankruptcy

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The hollowing out of Detroit is nearly complete. All that’s left is a bankrupt shell of a city with no services and scattered citizens that do not pay taxes.

The Detroit News reports Half of Detroit Property Owners Don’t Pay Taxes

Nearly half of the owners of Detroit’s 305,000 properties failed to pay their tax bills last year, exacerbating a punishing cycle of declining revenues and diminished services for a city in a financial crisis, according to a Detroit News analysis of government records.

The News reviewed more than 200,000 pages of tax documents and found that 47 percent of the city’s taxable parcels are delinquent on their 2011 bills. Some $ 246.5 million in taxes and fees went uncollected, about half of which was due Detroit and the rest to other entities, including Wayne County, Detroit Public Schools and the library.

Delinquency is so pervasive that 77 blocks had only one owner who paid taxes last year, The News found. Many of those who don’t pay question why they should in a city that struggles to light its streets or keep police on them.

“Why pay taxes?” asked Fred Phillips, who owes more than $ 2,600 on his home on an east-side block where five owners paid 2011 taxes. “Why should I send them taxes when they aren’t supplying services? It is sickening. … Every time I see the tax bill come, I think about the times we called and nobody came.”

Update on Detroit Bankruptcy

Detroit is financially and morally bankrupt yet the governor refuses to make that declaration. A Review team says Detroit faces financial crisis, has no plan to fix it so why won’t the governor act?

For the second time in a year, a state review team has found Detroit is in a financial emergency that requires Gov. Rick Snyder to intervene in City Hall.

But this time, if Snyder agrees that a financial emergency exists, the governor’s choices are more limited. He could appoint an emergency manager to keep Michigan’s largest city from plunging into bankruptcy, experts say, or he could continue state financial supervision through a new consent agreement, which seems a faint possibility.

State Treasurer Andy Dillon ruled out a bankruptcy filing at this time.

The six-member review team unanimously concluded in a report released Tuesday that the city failed to restructure its debt-laden bureaucracy under the financial consent agreement signed in April and that Detroit’s financial crisis requires Snyder’s intervention “because no satisfactory plan exists to resolve a serious financial problem.”

Chapter 9 bankruptcy is “always a possibility but I don’t think the city should go through (Chapter) 9 to cure its ailments,” he added.

The review team said the city’s charter adds “numerous restrictions” and hurdles for closing departments, canceling contracts and the type of wholesale restructuring financial experts say is necessary to make city government live within its means.

Restrictions? Who Cares?

In bankruptcy, restrictions go out the window. So do union contracts and pensions. Since all of that needs to go out the window, what’s holding the governor back?

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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Half of Detroit Properties Have Not Paid Taxes; Update on Detroit Bankruptcy

Common Queries A Brooklyn Bankruptcy Lawyer Can Address

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There are many common questions that a Brooklyn bankruptcy lawyer can deal with. Every bankruptcy case is different and should be handled this way. Every person will have a unique debt and asset situation, and will have a set income that should be considered as well. The income amount of the person filing for bankruptcy is very important because this will determine what chapter a bankruptcy petition is filed under. A common query is whether the person must file under chapter 7 or chapter 13 of the bankruptcy code.

Some queries that a skilled bankruptcy attorney may handle on a regular basis includes the exemptions that are allowed under the bankruptcy code. Federal law utilizes a set of specific exemptions, but in several instances the individual has a choice of using exemptions set by the state instead.A professional bankruptcy lawyer can figure out which exemptions are offered, and if more than one set can be chosen the lawyer can help guide the individual towards the exemptions that provide the best property coverage and protection.

Common questions that a Brooklyn bankruptcy attorney may be asked can involve the difference between secured and also unsecured property. Property that is secured by collateral, such as a home mortgage or a vehicle loan, might not be discharged in bankruptcy. In some cases it may be possible to reaffirm the financial debt and keep the property as long as the funds continue as scheduled, but most secure debt cannot be eliminated unless the property that is secured is returned to the creditor.

Filing for bankruptcy can involve lots of queries, especially if this process is unfamiliar. Before any first appointment with the bankruptcy attorney the person must get some forms and directions for completion.Nearly every property, debt, and income source should be listed. This involves household bills, credit card debt, and some other monies owed.

Always be truthful with the attorney retained, and if unsure regarding whether an item should be listed get the advice of the lawyer before going any further.

The typical queries that a Brooklyn bankruptcy lawyer can address can help figure out whether bankruptcy is the right choice, and make sure that the required outcome is achieved.

Common Queries A Brooklyn Bankruptcy Lawyer Can Address