Enter your email address and start getting breaking law firm and legal news right now!
|1,000,000 + Attorneys and Legal Staff - Legal employers hire more people on LawCrossing than any other site.|
Detroit Bankruptcy Plan Pinches Pensions
On July 18, 2013 the city of Detroit filed for Chapter 9 bankruptcy. This is a legal status of a person or other party that cannot repay the debts it owes to creditors. Estimated at $18–20 billion, Detroit is the largest municipal bankruptcy filing in U.S. history by debt. Detroit is also the largest city by population in the U.S. history to file for Chapter 9 bankruptcy. Bankruptcies of cities, towns, villages and counties since the Great Depression are rare, and there have only been about 60 since 1950.
Detroit’s population has declined from a peak of 1.8 million in 1950; to what recently, the New York Times has called the city “home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.”
Now according to Money CNN, Detroit city employees and retirees can face losing up to 34% of their promised pension benefits under the city’s bankruptcy plan. The 34% pension cut would be on general city employees and retirees from most departments. The city’s debt-adjustment plan is built on $820 million in contributions from private foundations and the state. According to Bloomberg Business week, Detroit’s new plan to end its $18 billion bankruptcy assumes bondholders offered 20 cents on the dollar will eventually swallow a deal that guarantees police and firefighters collect 90 percent of their pensions.
A spokeswoman for the city’s pension funds, Tina Bassett, reported “We are greatly disappointed that the plan contains debilitating and unnecessary cuts to…pension benefits.”
Bloomberg News reported that the American Federation of State, County and Municipal Employees said in a statement, “Retirees cannot survive these huge cuts to the pensions they earned. The plan is unfair and unacceptable.”
Kevyn Orr, The city’s emergency financial manager, told reporters “We need a settlement from everybody.” His plan offers reduced cuts. The restructuring in Detroit will allow the city to carry on with its most critical operations as well as get a better deal on some of the costlier union plans that it engaged in.
Image Credit: www.theguardian.comDetroit Bankruptcy Plan Pinches Pensions by Jaan