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If Detroit declares bankruptcy - what then?

By Catholic Online (NEWS CONSORTIUM)
December 4th, 2013
Catholic Online (

A personal declaration of bankruptcy can save assets and give an individual breathing room to reorganize their finances. However, if a major American city like Detroit declares bankruptcy, untold numbers of former city workers dependent on a pension will be left out in the cold. A judge has now ruled that Detroit is eligible for Chapter 9 bankruptcy protection. The decision has been met with the expected protests and demonstrations.

LOS ANGELES, CA (Catholic Online) - A crowd of more than 70 demonstrators circled the street in front of the federal courthouse. Some waved signs or chanted in support of city employees. "Bail out people, not banks!" read one sign. Another sign read "Stop debt service to banks that destroyed Detroit."

One former city worker said at the scene, "Pension is all we got, and now they want to cut that." He then pointed out that neither police officers or firefighters pay into Social Security. He's also worried about his mother, a retired Detroit bus driver with medical problems, too young for Medicare.

Since Detroit is now eligible for bankruptcy, emergency manager Kevyn Orr is expected to present his plan to reorganize the city's finances by year's end.

The plan on how to mitigate some $18 billion in debt includes what assets -- if any, are up for grabs. Among them is the collection at the Detroit Institute of Arts and the municipal water system.

U.S. Bankruptcy Judge Steven Rhodes also opened the door to pension reductions. Rhodes pointed out that Detroit pensioners had only contractual rights to their benefits. He also warned Orr, however, that such cuts would not be considered lightly.

"I'm thinking about getting a side job, but who in this economy is going to hire a 58-year-old?" one fire department retiree says. He currently takes five medications daily after heart bypass surgery and is frightened over what will happen if out-of-pocket health care costs increase.

Another retired fire department employee says he lost his downtown condo to foreclosure late last year. Health-related expenses for both him and his wife have wiped them out, he said. "Now this," he said of the ruling. "I'm struggling."

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