Detroit defends constitutionality of bankruptcy protection

Sept. 7, 2013 at 1:31 PM
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DETROIT, Sept. 7 (UPI) -- The City of Detroit denied in court documents claims that its bankruptcy plan violated state protections for pensioners.

A 135-page response to objections to bankruptcy protection for the city said neither the Chapter 9 bankruptcy petition nor Michigan Gov. Rick Snyder's approval of the petition had any effect on pensions.

City lawyer Bruce Bennett wrote that any changes in pensions would have to pass muster in federal bankruptcy court at a later date.

"These are simply steps that begin the bankruptcy process, where pensions may be impaired by order of a federal bankruptcy court at some later date," Bennett wrote.

Bennett discounted claims by city unions that Snyder was obligated to protect pensions from being slashed under the terms of the state constitution.

Detroit faces an estimated $3.5 billion in unfunded pension liabilities, and legal observers expect retired city workers to face a major reduction in benefits.

The Detroit News said Saturday the city's stance received a boost Friday in a ruling by Michigan Attorney General Bill Schuette, whose office said in a legal brief that seeking Chapter 9 could not be interpreted as plan to cut pensions.

"Simply authorizing the filing under Chapter 9 does not diminish or impair a single pension," assistant Attorney General Steven Flancher wrote.

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