Detroit bankruptcy in legal jeopardy after ruling

THE CITY of Detroit’s legal application to go bankrupt has been put under threat by a local judge who has ruled that the attempt is unconstitutional.

Michigan’s attorney general, Bill Schuette, will appeal the order, made by a country circuit judge, Rosemary Aquilina. She claims that retirement benefits may be reduced by proceedings in a federal bankruptcy court, which is illegal under the state’s law.

For the city to successfully apply to default, it must prove to a court that it has explored alternatives to honour its obligations to creditors and continue making statutory payments to retirees.

Detroit has lost over a quarter of its population since the millennium, and suffers from lower incomes and higher unemployment than the US average. With large responsibilities to bondholders, the city’s dwindling tax base has been insufficient to fund responsibilities taken out in earlier years.