From Denver Post, Ed White Associated Press-
Detroit's bankruptcy is at a critical stage after the Michigan Legislature last week approved a $195 million lifeline to help prevent steep cuts in Detroit's pensions and the sale of city-owned art. With Gov. Rick Snyder expected to sign the measure this week, attention now turns to the tens of thousands of creditors, especially 32,000 active, former or retired employees, who have until July 11 to vote on the city's plan to shed $18 billion in debt and become solvent again.
The stakes are great — and painful. General retirees — trash haulers, mechanics, janitors, clerks — would see a 4.5 percent cut in their pension and the elimination of annual inflation payments. In addition, some who received generous annuity returns from the pension fund, even in awful market conditions, would be forced to give back as much as 20 percent. Detroit insists the cuts will be even worse if the plan is rejected. Here's a look at where things stand:
Count the votes
Tens of thousands of creditors in different classes have until July 11 to vote on the city's proposed cure, but eyes mostly are on retirees whose modest pensions, averaging $19,000 a year, would be cut by 4.5 percent. They would also lose annual cost-of-living payments. Police and fire retirees, whose separate pension fund is healthier, would see only a small cost-of-living cut.
Pot of money
If the pension changes are approved, a surge of outside cash — $816 million — would flow from foundations, philanthropists and the state of Michigan to prevent any deeper cuts and protect city-owned art at the Detroit Institute of Arts. If the pension changes are defeated, the money disappears and cuts would be drastic.
Bankruptcy trial
Creditors don't get the final word in approving or rejecting a bankruptcy exit. Judge Steven Rhodes plans to hold a multi-day trial, starting July 24. His job is to determine whether the plan is "feasible" and in the best interest of creditors. The judge has his own experts to advise him. Rhodes can force the entire plan on creditors, from Wall Street to Main Street, even if they don't like what Detroit is proposing. To trigger "cram down," he needs only one class of creditors to vote in favor.
Pension shield
Michigan's constitution says a pension earned in a public job can't be harmed. But Rhodes in December said there's no such protection in bankruptcy — the most significant decision so far. It shifted momentum to the city and led to a series of closed-door talks to reach a compromise with retirees, unions and pension funds. State Attorney General Bill Schuette believes Rhodes is wrong, but he'll drop a legal challenge at a federal appeals court if retirees vote to take the hit.
The Forgotson Law Firm is one of Oklahoma City’s premier Chapter 7 and Chapter 13 bankruptcy firms.
Call today and schedule your FREE initial consultation.
Forgotson Law
1230 S.W. 89th, Suite A
Oklahoma City, OK 73139
405-703-4567
Detroit's bankruptcy is at a critical stage after the Michigan Legislature last week approved a $195 million lifeline to help prevent steep cuts in Detroit's pensions and the sale of city-owned art. With Gov. Rick Snyder expected to sign the measure this week, attention now turns to the tens of thousands of creditors, especially 32,000 active, former or retired employees, who have until July 11 to vote on the city's plan to shed $18 billion in debt and become solvent again.
The stakes are great — and painful. General retirees — trash haulers, mechanics, janitors, clerks — would see a 4.5 percent cut in their pension and the elimination of annual inflation payments. In addition, some who received generous annuity returns from the pension fund, even in awful market conditions, would be forced to give back as much as 20 percent. Detroit insists the cuts will be even worse if the plan is rejected. Here's a look at where things stand:
Count the votes
Tens of thousands of creditors in different classes have until July 11 to vote on the city's proposed cure, but eyes mostly are on retirees whose modest pensions, averaging $19,000 a year, would be cut by 4.5 percent. They would also lose annual cost-of-living payments. Police and fire retirees, whose separate pension fund is healthier, would see only a small cost-of-living cut.
Pot of money
If the pension changes are approved, a surge of outside cash — $816 million — would flow from foundations, philanthropists and the state of Michigan to prevent any deeper cuts and protect city-owned art at the Detroit Institute of Arts. If the pension changes are defeated, the money disappears and cuts would be drastic.
Bankruptcy trial
Creditors don't get the final word in approving or rejecting a bankruptcy exit. Judge Steven Rhodes plans to hold a multi-day trial, starting July 24. His job is to determine whether the plan is "feasible" and in the best interest of creditors. The judge has his own experts to advise him. Rhodes can force the entire plan on creditors, from Wall Street to Main Street, even if they don't like what Detroit is proposing. To trigger "cram down," he needs only one class of creditors to vote in favor.
Pension shield
Michigan's constitution says a pension earned in a public job can't be harmed. But Rhodes in December said there's no such protection in bankruptcy — the most significant decision so far. It shifted momentum to the city and led to a series of closed-door talks to reach a compromise with retirees, unions and pension funds. State Attorney General Bill Schuette believes Rhodes is wrong, but he'll drop a legal challenge at a federal appeals court if retirees vote to take the hit.
The Forgotson Law Firm is one of Oklahoma City’s premier Chapter 7 and Chapter 13 bankruptcy firms.
Call today and schedule your FREE initial consultation.
Forgotson Law
1230 S.W. 89th, Suite A
Oklahoma City, OK 73139
405-703-4567