Creditors file objections to bankruptcy of Detroit

DETROIT - The Associated Press

Deadline day arrived on Aug. 19 for creditors to oppose Detroit’s request for bankruptcy protection, the largest municipal filing in US history. AP photo

The city’s biggest employee union, retirees and even a few dozen residents have filed objections to Detroit’s request for bankruptcy protection, the largest municipal filing in U.S. history and a move aimed at wiping away billions of dollars in debt. The filing by the American Federation of State, County & Municipal Employees Michigan Council 25 also came before expected objections from two city pension systems, bondholders, banks and others who hope to convince federal Judge Steven Rhodes not to allow the Chapter 9 bankruptcy petition by Detroit emergency manager Kevyn Orr.

Rhodes set Aug. 19 as the eligibility objection deadline. Attorneys for large creditors have until just before midnight to file objections electronically. Individual creditors who fear losing their pensions and paying more for health care began filing objections Monday in person at the court. By early Aug. 19 evening, more than 100 objections had been filed including those made by several smaller city unions.

Detroit has about 21,000 retired workers who are owed benefits, with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage. Mary Dugans, one of those retirees, filed an individual objection on Aug. 19.

Deadline for objections drew protesters outside federal court in Detroit.

Some in a group of about 30 people amassed outside the building said in their filings that there are no provisions in Chapter 9 that gave Orr authority to file the bankruptcy petition and that it was done without the consent of the city’s elected representatives.

But only creditors holding accepted claims likely have standing to object to Orr’s petition, according to James McTevia, a turnaround expert and managing member of McTevia & Associates.

“While there is no doubt that ... residents are seriously affected by the city of Detroit’s problems and the ultimate resolutions, it is my opinion that they are not either individually or collectivelycreditors,” he wrote Monday in an email to The Associated Press.

Aug. 19 deadline is just one of several steps that could lead to Judge Rhodes allowing Detroit into bankruptcy protection while it restructures.

Some bankruptcy experts say it can be difficult for objections to stop a bankruptcy, but they have proved successful in a few cases.