DETROIT’S bankruptcy filing has been challenged in the courts by pension funds and unions, who are claiming the city’s filing falls afoul of the US constitution.
Interested parties had until yesterday to lodge their objections to the biggest municipal bankruptcy in American history.
While bondholders refrained, unions for public sector workers argued that the decision contravened retirement rights as well as the state of Michigan’s federal powers.
Objectors also argued that state-appointed emergency manager Kevyn Orr did not negotiate with creditors in good faith.
Detroit has debts of more than $18bn. Its largest unsecured creditors are its two pension funds, which have claims totaling $3.74bn in estimated unfunded liabilities, according to a court filing by the city.
Their arguments will be heard at a federal bankruptcy hearing in October.
Creditors are facing steep losses and a potential loss of benefits looms over more than 9,000 workers and around 23,000 retirees in the city.