Business, Economics and Jobs

Detroit bankruptcy unconstitutional, Michigan judge rules

A Michigan judge on Friday complicated Detroit’s bankruptcy even further by saying the move was unconstitutional.

Circuit Judge Rosemarie Aquilina ruled the unprecedented action from Gov. Rick Snyder and emergency manager Kevyn Orr was not their’s to make because it threatened pensions and retiree benefits, the Detroit Free Press reported.

She ordered Orr to withdraw the federal bankruptcy petition he filed for the city on Thursday, Reuters reported.

“I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” Aquilina said, according to the Freep.

“Plaintiffs shouldn’t have been blindsided.”

What they did, the judge said, was against the Michigan Constitution. Aquilina said the governor doesn’t have the power to “diminish or impair pension benefits,” Reuters reported.

Detroit is the largest city in America to file for Chapter 9; it’s facing a crisis trying to resolve $18.5 billion in long-term debt and has thousands of unpaid creditors.

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It will have to provide a list of creditors and formulate a plan to satisfy a bankruptcy court, an expensive and likely years-long process.

Yet, the decision is considered vital for Detroit’s health.

Its population has dropped from 2 million during its heydays in the 1950s to about 700,000 now, with suburban migration leaving behind widespread crime and crumbling services, The Washington Post reported.

The once-infallible automotive industry has also taken a huge hit with stiffer competition from overseas.

Thursday's bankruptcy filing came minutes before Aquilina was to hear a motion from pensioners and two city pension funds to stop the move.

The governor brushed off accusations the decision was unconstitutional.

“That’s a matter in litigation and we have very good attorneys who I'm sure are on top of that,” Snyder told Reuters.

Attorney General Bill Schuette said he plans to appeal today’s ruling.

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