July 30 U.S. Bankruptcy Judge Steven Rhodes on
Tuesday proposed speedy deadlines for Detroit's municipal
bankruptcy filing, including an October trial to determine if
the city can pursue bankruptcy and a March 1, 2014 date for it
to file a reorganization plan.
The judge proposed Oct. 23 for the start of a trial on
potential objections to Detroit's eligibility to file what would
be the biggest Chapter 9 municipal bankruptcy in U.S. history.
The proposed dates and deadlines will be the subject of a
hearing in federal bankruptcy court in Detroit on Friday.
Rhodes' schedule is more ambitious in some areas than the
one proposed by Kevyn Orr, Detroit's state-appointed emergency
manager, after he filed the city's bankruptcy petition on July
18. In the filing, Orr set a goal of concluding the city's
bankruptcy case no later than September 2014.
Doug Bernstein, a Detroit-based bankruptcy lawyer at
Plunkett Cooney, said the schedule indicates the judge wants to
move the case along quickly. But doing so in a politically
sensitive case like Detroit's may prove challenging.
"He's got to do a balancing act," Bernstein said. "The
longer a case languishes, the more it costs everybody, so he's
very aware of that. But he's got to balance that with affording
all the parties due process."
The schedules put forward by Orr and Rhodes would have
Detroit moving through bankruptcy court more quickly than
Stockton, California, which took nearly a year to pass through
the eligibility phase alone. With more than $18 billion in
liabilities at the time it filed for bankruptcy, Detroit's debt
load dwarfs that of Stockton, which listed liabilities of around
$1 billion when it filed in June 2012.
Judge Rhodes proposed an Aug. 19 deadline for creditors to
file objections to Detroit's case to proceed through bankruptcy
court. Orr, a former corporate bankruptcy attorney, had proposed
the same deadline, while requesting a hearing on eligibility
objections "as soon as the court's schedule will permit."
Rhodes last week suspended lawsuits pending in Michigan
courts by city workers, retirees and pension funds seeking to
derail Detroit's bankruptcy petition, putting his court in full
control of the case.
The next step will determine if the city is eligible for
bankruptcy. Detroit must prove that it is insolvent and that it
made a good-faith effort to negotiate with creditors owed more
than $18 billion or that there are too many creditors to make