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Detroit bankruptcy case to proceed, judge says

July 24, 2013 at 3:34 PM   |   Comments

DETROIT, July 24 (UPI) -- A federal judge overruled challenges to Detroit's municipal bankruptcy filing Wednesday, freezing several lawsuits and allowing the case to proceed.

U.S. District Court Judge Steven Rhodes noted in his decision that recent Chapter 9 bankruptcy cases determined the bankruptcy court has jurisdiction to determine eligibility issues raised by creditors.

His decision came after city lawyers argued in a Wednesday hearing that Detroit would be irreparably harmed if retirees were able to block the bankruptcy filing. Retirees and city pension managers claim the filing violates constitutional protections of vested pension benefits, the Detroit News reported.

Lawyers sparred for 2 hours in a hearing, with city lawyer Heather Lennox arguing the city would be "prevented from accessing necessary protections" of a Chapter 9 filing if three lawsuits filed in by retirees in state court continue and if the bankruptcy proceeding is halted.

Municipal workers' lawyers argued the filing is flawed because it is designed to reduce retiree pension benefits, the newspaper reported. The bankruptcy is an attempt to override state constitutional guarantees protecting vested pension benefits, said Sharon Levine, an attorney for a union that represents city employees.

Detroit filed for bankruptcy protection last week, claiming over $18 billion in debts.

More than 175 lawyers, representing both sides, were present at the hearing Wednesday, the Detroit Free Press noted.

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