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Detroit legal battle over bankruptcy petition | Detroit legal battle over bankruptcy petition |
(about 1 hour later) | |
A judge in the US state of Michigan has ordered the city of Detroit to withdraw its application for bankruptcy over its debts of $18bn (£12bn). | A judge in the US state of Michigan has ordered the city of Detroit to withdraw its application for bankruptcy over its debts of $18bn (£12bn). |
Judge Rosemarie Aquilina said the petition, filed on Thursday, violated the state's laws and constitution because it threatened pension benefits. | Judge Rosemarie Aquilina said the petition, filed on Thursday, violated the state's laws and constitution because it threatened pension benefits. |
But the state's attorney general immediately appealed against the order. | But the state's attorney general immediately appealed against the order. |
Earlier, Governor Rick Snyder said the move towards bankruptcy would reverse decades of decay. | Earlier, Governor Rick Snyder said the move towards bankruptcy would reverse decades of decay. |
Bankruptcy would allow Detroit's state-appointed emergency manager, Kevyn Orr, to liquidate the city's assets to try to meet the demands of creditors and pensioners. | |
Mr Orr proposed a deal in June in which creditors would accept 10 cents for every dollar they were owed. | Mr Orr proposed a deal in June in which creditors would accept 10 cents for every dollar they were owed. |
But two pension funds representing retired city workers have resisted the bankruptcy plan, and - with tens of thousands of creditors - the city is already facing a number of lawsuits. | But two pension funds representing retired city workers have resisted the bankruptcy plan, and - with tens of thousands of creditors - the city is already facing a number of lawsuits. |
In her ruling on Friday, Circuit Judge Rosemarie Aquilina sided with the pension plaintiffs. | In her ruling on Friday, Circuit Judge Rosemarie Aquilina sided with the pension plaintiffs. |
She ruled that the 2012 law which allowed for bankruptcy to be filed was unconstitutional, but it enabled the state governor to jeopardise the pension benefits of public employees. | She ruled that the 2012 law which allowed for bankruptcy to be filed was unconstitutional, but it enabled the state governor to jeopardise the pension benefits of public employees. |
But it remained unclear what impact the ruling would have on the proceedings. | But it remained unclear what impact the ruling would have on the proceedings. |
The BBC's Jonny Dymond, in Detroit, says it is just the first stage in a multi-layer legal system, but that it throws into question the stunningly complex rescue plan for the troubled city. | The BBC's Jonny Dymond, in Detroit, says it is just the first stage in a multi-layer legal system, but that it throws into question the stunningly complex rescue plan for the troubled city. |
Shortly after, Michigan Attorney General Bill Schuette said he had appealed against Judge Aquilina's rulings on behalf of Governor Snyder. | Shortly after, Michigan Attorney General Bill Schuette said he had appealed against Judge Aquilina's rulings on behalf of Governor Snyder. |
'Basically broke' | 'Basically broke' |
Detroit is the largest US city ever to file for bankruptcy. In 2012, three smaller California cities - Stockton, Mammoth Lakes and San Bernardino - took the step. | Detroit is the largest US city ever to file for bankruptcy. In 2012, three smaller California cities - Stockton, Mammoth Lakes and San Bernardino - took the step. |
It has been struggling for decades with spiralling debts - public services are nearing collapse and about 70,000 properties lie abandoned. | It has been struggling for decades with spiralling debts - public services are nearing collapse and about 70,000 properties lie abandoned. |
Known as Motor City for its once-thriving automobile industry, Detroit stopped debt repayments to unsecured creditors last month to keep the city running. | Known as Motor City for its once-thriving automobile industry, Detroit stopped debt repayments to unsecured creditors last month to keep the city running. |
About $9bn of Detroit's debt is owed to the pension funds and retiree healthcare benefits of the city's 10,000 workers and 20,000 retirees. | About $9bn of Detroit's debt is owed to the pension funds and retiree healthcare benefits of the city's 10,000 workers and 20,000 retirees. |
Earlier on Friday, Gov Snyder said the city had filed for bankruptcy on because it was "basically broke". | Earlier on Friday, Gov Snyder said the city had filed for bankruptcy on because it was "basically broke". |
"We're the comeback state in Michigan, but to be a great state, we need Detroit on the path to being a great city again," he told Friday's news conference. | "We're the comeback state in Michigan, but to be a great state, we need Detroit on the path to being a great city again," he told Friday's news conference. |
"Now is the opportunity to stop 60 years of decline," he added. | "Now is the opportunity to stop 60 years of decline," he added. |
"We will come out with a stronger, better Detroit and a format to grow this city. The citizens of not just this city but the state deserve it." | "We will come out with a stronger, better Detroit and a format to grow this city. The citizens of not just this city but the state deserve it." |