Judge Steven Rhodes declared the city's bankruptcy application met the specific criteria to receive protection from its creditors, to whom it owes $18 billion in debt and long-term liabilities.
“The court finds that Detroit was and is insolvent,” he said. “The court finds that the city was generally not paying its debts as they became due.”
In a surprise move, Rhodes also allowed the city to include cuts to pensions in its final proposal for reorganization, but said he wouldn't necessarily approve such cuts unless the plan was fair.
“Pension benefits are a contractual obligation of a municipality and not entitled to any heightened protection in bankruptcy,” Rhodes said.
The creditors are expected to appeal the ruling, but experts say bankruptcy courts rarely overturn rulings made on facts.
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