A federal judge has granted the city of Detroit the ability to proceed with its bankruptcy filing. This is the largest municipal bankruptcy in history. The recent ruling, opens the door for the city to cut billions of dollars in payments that are owed to city employees, retirees, investors and other creditors.
Unions and pension funds argued that Detroit did not negotiate with its creditors in good faith in an effort to reach a deal on its liabilities. In his ruling, however, Judge Steven Rhodes found that such negotiations were impractical for Detroit because of the huge number of creditors, which total more than 100,000. Therefore, he concluded that the city filed its petition properly.
The American Federation of State, County & Municipal Employees, a major union, has plans to appeal the decision.
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