Detroit declared bankruptcy today. For California, here are the takeaways from the Detroit News report:
“A bankruptcy judge could trump the state constitution by slashing retiree pensions, ripping up contracts and paying creditors roughly a dime on the dollar for unsecured claims worth $11.45 billion.”That’s because the bankruptcy will be heard in a federal bankruptcy court. The California Constitution has similar clauses. California’s pension funds insist that, no matter what, the pensions are sacrosanct; that state law trumps federal bankruptcy law. The Detroit bankruptcy could provide an answer.
Emergency Manager Kevyn Orr…
“proposed paying most of the money owed to secured creditors while pension funds, unions and unsecured bondholders would receive, in some cases, 10 cents on the dollar.”That’s right: 10 percent. Which means the funds themselves effectively would become insolvent, and pensioners would not get paid.
◼ Detroit files for largest municipal bankruptcy in US history - FOX
The filing leads to a 30 to 90 day period that will determine whether or not the city of Detroit is eligible for Chapter 9 protection, and define the number of claimants who may compete for Detroit’s limited settlement resources. The petition seeks protection from unions and creditors who are renegotiating $18.5 billion in debt and liabilities, according to the Detroit Free Press.
◼ Bust: The numbers behind Detroit’s road to doom - Mary Katharine Ham/HotAir
◼ Flashback: Obama boasted in 2012: ‘We refused to let Detroit go bankrupt’ - Charlie Spiering/Washington Examiner @charlesspiering
