Livonia Michigan Bankruptcy - Michigan Bankruptcy Blog

Livonia Michigan Bankruptcy

Michigan Bankruptcy Blog

DETROIT HEADED FOR BANKRUPTCY?

Posted by Peter Behrmann, Esq. On November 7th

The people of Michigan voted to repeal the emergency manager law.  The repeal is leaving in doubt what will be the next step for struggling governmental bodies throughout Michigan.  The Emergency Manager Law allowed the governor to declare a local government or school district in financial distress and appoint an emergency manager to take control.

 

The emergency manager law which has been controversial from its start allowed emergency managers to amend or remove collective bargaining agreements under certain circumstances.  The supporters of collective bargaining have labeled the law as “Union Busting” and ran a strong and successful campaign to have the law repealed.  The supporters of the emergency manager law urged that the emergency manager process was preventing local governments from filing bankruptcy.

 

Well the supporters of collective bargaining have won, and the next and possibly only choice will now be for distressed local governments to seek Chapter 9 Bankruptcy protection.  Chapter 9 under Title 11 of the United States Code is a chapter of the United States Bankruptcy Code available exclusively to municipalities and assists them in the restructuring of debts.  Chapter 9 is similar to an individual filing a Chapter 13 bankruptcy or a business filing a Chapter 11 bankruptcy.  Chapter 9 allows governmental entities to reorganize their financial liabilities under the laws of the Bankruptcy Code.

 

I almost think that supporters of the movement to repeal the emergency manager law did not understand what they will be getting.  What they could be getting is Chapter 9 Bankruptcy which will put municipalities and local governmental units under the exclusive control of a Bankruptcy Judge. 

 

Within Chapter 9 bankruptcy, labor contracts can be rejected, and pension liabilities can also be eliminated just like the emergency manager law.  Local governments just need to show that the labor contract is substantially detrimental to the government viability and prove they have made a reasonable attempt to renegotiate.  If they can prove that the contracts can be eliminated by the Bankruptcy Judge to make sure the governmental unit is on the right track for financial viability. 

 

The point to all of this is nothing is really going the change.  We may no longer have emergency managers or municipalities under management of the emergency manager law.  We will now have Bankruptcy Judges running municipalities under Chapter 9 of the United States Bankruptcy Code.   

Peter Behrmann is a Livonia Bankruptcy Attorney.  From my Livonia, Michigan location, I represent clients throughout Metro Detroit and beyond, including Garden City, Wayne, Westland, Redford, Dearborn, Taylor, Ann Arbor, Belleville, Northville, Novi, Farmington, Farmington Hills, Plymouth, Canton, and the Counties of Wayne, Oakland, Livingston, and Washtenaw. My practice is limited to helping consumers like you file Chapter 7 and Chapter 13 Bankruptcy.

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