Detroit's historic bankruptcy trial to begin

Before you go, we thought you'd like these...
Before you go close icon
28 PHOTOS
Detroit's recovery plan - updated 9/2/14
See Gallery
Detroit's historic bankruptcy trial to begin
In this July 16, 2013 aerial file photo, the downtown of the city of Detroit is shown. Detroit Emergency Manager Kevyn Orr raised more than a few eyebrows a year ago when he took the city into bankruptcy and predicted it would be out by the time his term expired in fall 2014. Because it is by far the largest city to file for municipal bankruptcy and the issues were so complex many experts predicted it would take years to resolve. But the city will take a major step toward that goal with a trial in federal bankruptcy court that starts Tuesday, Sept 2, 2014. (AP Photo/Paul Sancya, File)
A sign on a rental truck is shown as retirees protest near the federal courthouse in Detroit, Thursday, July 3, 2014. Ballots submitted by city workers, retirees, pensioners and other creditors likely will determine how quickly Detroit exits its historic bankruptcy. The city’s two pension groups _ grudgingly _ have been pushing their members to vote “yes” on a restructuring plan that seeks to cut their income. Rejection of the plan could lead to what’s known as a cram down and steeper reduction in pension payments. (AP Photo/Paul Sancya)
FILE - In an Oct. 10, 2013 photo is a manhole cover is seen in Detroit. The city, which was about to default on a good chunk of a long-term debt exceeding $18 billion, now is getting a second chance in a federal bankruptcy court-led restructuring. (AP Photo/Carlos Osorio, File)
In a photo from Thursday, Feb. 20, 2014 is the monument to the boxer Joe Louis in Detroit. Detroit's emergency manager filed a plan Friday, Feb. 21, 2014 to restructure the city's $18 billion debt by making cuts to pensions and creditors while offering a blueprint for emerging from the largest municipal bankruptcy in U.S. history. (AP Photo/Carlos Osorio)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator removes debris from a demolished house next to a house with a foreclosure notice in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
FLINT, MI - MAY 13: Scott Hempeo (L) and Tyler Bienlein work with Habitat For Humanity workers at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Tyler Bienlein (C) and Mastercard employees work at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Habitat for Humanity, Mastercard employee's and speakers pose with Scott Hempeo (LC) and Tyler Bienlein (RC) at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Congressman Dan Kildee (L) speaks to employee's at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Scott Hempeo and Tyler Bienlein work with Habitat For Humanity workers at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: General view during the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
United Auto Workers (UAW) members applaud during a news conference at the General Motors Co. assembly plant in Flint, Michigan, U.S., on Monday, Dec. 16, 2013. General Motors Co., amid a push to refresh most of its U.S. lineup, said it plans to spend $1.3 billion to upgrade five U.S factories on top of the $1.5 billion already announced this year. Photographer: Bryan Mitchell/Bloomberg via Getty Images
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
This photo shows a row of abandoned houses, Thursday, Sept. 26, 2013 in Detroit. Four of President Barack Obama's top advisers will converge on Detroit Friday to meet privately with state and local leaders about ways the federal government can help the bankrupt city short of a bailout. The White House said Thursday that top economic adviser Gene Sperling will join U.S. Attorney General Eric Holder, Transportation Secretary Anthony Foxx and HUD Secretary Shaun Donovan in the closed meeting. (AP Photo/Carlos Osorio)
DETROIT, MI - SEPTEMBER 04: Remnants of Detroit's historic Eastown Theatre are seen on September 4, 2013 in Detroit, Michigan. The theatre operated as a movie theater, music venue and church off-and-on from 1931 until 2004; the building could seat 2,500 people. Since 2004 it has been abandoned and fallen into disrepair. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Ruins at the abandoned Packard Automotive Plant are seen on September 4, 2013 in Detroit, Michigan. The Packard Plant was a 3.5 million square foot car manufacturing plant built completed in 1911. Major operations ceased in 1958, though the plant was used in a limited capacity until the 1990s, with outer buildings used through the mid 2000s. Since then the buildings have fallen into disrepair - they are now used mostly for graffitti artists and scavengers. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Tony Brown, a homeless man, takes a nap as members of the Detroit Fire Department fight a two-alarm fire that broke out in an abandoned building down the street on September 4, 2013 in the Six Mile Gratiot neighborhood of Detroit, Michigan. Detroit has an estimated 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Tony Brown, a homeless man, smokes a cigarette as members of the Detroit Fire Department fight a two-alarm fire that broke out in an abandoned building down the street on September 4, 2013 in the Six Mile Gratiot neighborhood of Detroit, Michigan. Detroit has an estimated 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: A wild dog wanders through Detroit's historic Eastown Theatre are seen on September 4, 2013 in Detroit, Michigan. The theatre operated as a movie theater, music venue and church off-and-on from 1931 until 2004; the building could seat 2,500 people. Since 2004 it has been abandoned and fallen into disrepair. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. The city has recently also struggled with packs of wild dogs roving the streets. (Photo by Andrew Burton/Getty Images)
of
SEE ALL
BACK TO SLIDE
SHOW CAPTION +
HIDE CAPTION


BY COREY WILLIAMS

DETROIT (AP) - Starting Tuesday, lawyers for Detroit will attempt to convince a federal judge at the city's bankruptcy trial that its plans to wipe out the city's billions of dollars in debt should be approved.

After some delays, the trial in U.S. District Court begins a little more than 13 months after Detroit became the largest U.S. city to file for bankruptcy.

Detroit expects to cut $12 billion in unsecured debt to about $5 billion, which is "more manageable," according to Bill Nowling, a spokesman for state-appointed emergency manager Kevyn Orr, who has been in charge of Detroit's finances since March 2013.

Most creditors, including more than 30,000 retirees and city employees, have endorsed the plan of adjustment put together by Orr, who guided Chrysler through its bankruptcy, and his restructuring team.

The plan includes commitments from the state, major corporations, foundations and others to donate more than $800 million over 20 years to soften cuts to city pensions. In return, pieces in the city-owned Detroit Institute of Arts would be placed into a trust to keep them from being sold to satisfy creditors.

General retirees would take a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise.

The strongest opposition to the plan has come from bond insurers like New York-based Syncora Guarantee. Syncora has said its claim is about $400 million and that Detroit has unfairly discriminated against financial creditors.

"It has been a very fast-track bankruptcy, which Syncora has no issue with," company attorney James Sprayregen said. "Syncora's issue is the lack of transparency of the process and the unfair treatment of its claims."

Bankruptcy Judge Steven Rhodes has scheduled additional hearing dates, if needed, into October.

But in the end, bankruptcy expert Anthony Sabino expects Rhodes to approve Detroit's bankruptcy plan - followed by appeals from creditors.

Read Full Story
Credit Card Compare

Credit Card Compare

Whether you're looking for great travel rewards or low annual fees, find the card that's right for you.

Compare Now

From Our Partners