What comes next in Detroit's bankruptcy?

State judge finds Gov. Snyder, Orr's decision unconstitutional


DETROITThe bankruptcy battle has begun with late breaking developments in Detroit's Chapter 9 bankruptcy filing.

A state judge has ruled it unconstitutional and demands Governor Snyder pull back the case.  The Michigan Attorney General wants an emergency hearing to try and stop that case and the governor doesn't appear like he's going to withdraw his approval of Chapter 9.

"This is the day to stabilize Detroit," Snyder said in defense of his bankruptcy decision.

Read: Meloni: There was never any doubt

Kevyn Orr chastised the opposition "your decision instead of coming to the table with me is to continually file lawsuits against me. Who is not operating in good faith?"

Friday Judge Rosemarie Aquilina declared Orr and Snyder's actions as unconstitutional saying it blindsides pensioners who stand to lose much in the Chapter 9.

Read: Detroit retirees fear pension cuts after bankruptcy filing.

Her only problem is once a Chapter 9 case is filed there is an automatic stay of legal challenges. Local 4 bankruptcy expert Doug Bernstein of Plunkett Cooney says the judge is out on a limb.

"After the fact of the filing it's kind of surprising that she would take that approach because really once the bankruptcy is filed as long as it's pending all matters are stayed by operation of the bankruptcy code. So it's an unusual step," he said.

While that battle simmers many are wondering what comes next.

Well, there is the choosing of a bankruptcy judge which came this afternoon. Judge Stephen Rhodes, a Detroit based bankruptcy judge, was chosen for the task.

Rhodes will set ground rules and scheduling to manage objections then he will start hearing the case on whether Detroit qualifies to be in bankruptcy in the first place.

"The decision on that issues, the eligibility may take up to a year," said Bernstein.

In Stockton, California it took a year and the city did not qualify and had to go back and re-file. Orr says he intends to avoid that.

In the end the idea is to work toward a plan that the creditors all agree on and that could take a year or two or more.

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