How can Detroit go Bankrupt?
It’s been a topic of conversation in our offices, and our clients in New York City seem curious too: how can Detroit go bankrupt? The eighth largest city in the United States, despite efforts to bail out its automobile industry, has filed for bankruptcy. The bailouts Chrysler and GM received were not enough to save the city of Detroit. The city government has racked up debt of over $18 billion, and has over 100,000 creditors to answer too. Public services may be reduced and the city may lay off more workers. Detroit is flat broke, and the affects of their bankruptcy may trickle down to other municipalities and local economies across the country.
Detroit really needs a fresh start. Because of its debt the city has lost 40% of its residents since 2000 as basic services are being turned off in some areas, and thousands of homes sit vacant. Emergency services may take more than an hour to respond to a 911 call. The streets are dark because tens of thousands of street lights no longer work, and the city still has some of the highest crime rates in the US. Bankruptcy is simply the only option left that will save the city.
Detroit’s filing is by far the largest municipal bankruptcy ever, and is surely a pivotal moment. But what should the average consumer that is faced with a personally crushing financial situation take from all this? While Detroit is required to file a Chapter 9 bankruptcy, which is a different process from a consumer Chapter 7 or Chapter 13, a valuable lesson still exists for individuals faced with a bankruptcy of their own.
When chit chatting with clients here in our Midtown offices in New York City about the Detroit bankruptcy and what I believe any consumer can take away from the Detroit tale is this: When Detroit’s financial problems became so overwhelming that no clear end was in sight, the governor of Michigan relieved the Mayor and City Counsel of Detroit and put the best bankruptcy attorney available in charge of the city’s finances and in charge of negotiating its debt.
Governor Rick Snyder named Kevyn Orr as the emergency city manager of Detroit when he realized the city government had no plan for financial reform. Mr. Orr is not a traditional city bureaucrat, which the Wall Street Creditors would have loved to see I’m sure, but is in fact a seasoned corporate bankruptcy attorney known for an aggressive negotiating style and for getting results for his clients. He negotiated the 2009 Chrysler bankruptcy and is experienced in private sector bankruptcy negotiations. Governor Snyder knew Mr. Orr’s experience and negotiating ability would be crucial, and that an emergency city manager from the public sector would just not do. Frankly the governor knew that Detroit needed the best possible representation in its bankruptcy.
It’s likely that Detroit will be found eligible for Chapter 9 Bankruptcy at a hearing this coming Oct. After the bankruptcy process the city will have a chance to rebuild itself and recover from the dire financial situation it is currently in. If you find yourself facing overwhelming debt of your own, understand you have a legal right to seek a financial fresh start as well. Any bankruptcy filing requires qualified legal assistance. You may not be the city of Detroit, but if you are faced with serious debt issues it pays to find an attorney that will protect your rights and has the experience to handle all the intricacies of your case.
If you live in New York and have questions about bankruptcy protection please call the offices of William Walder at 212-244-2882 for a free bankruptcy consultation today. We only handle bankruptcy cases, and unlike many bankruptcy mills we have a 99% Chapter 7 bankruptcy discharge record and great reputation with the courts (as of 9/31/16).
This article is intended for educational purposes only. By reading this article no attorney-client relationship has been created.