Experts expect judge to rule Detroit is bankruptcy eligible

Judge Steven Rhodes set to rule on city's Chapter 9 municipal bankruptcy eligibility

By Rod Meloni - Reporter, CFP ®

DETROIT - Judge Steven Rhodes will take the bench at 10 a.m. Tuesday and go back over the nine-day eligibility trial, the governor's "unusual" testimony -- Kevyn Orr's words -- and all of the objections to Detroit's Chapter 9 municipal bankruptcy filing.

Former Detroit bankruptcy judge Ray Reynolds Graves believes he knows which way Judge Rhodes will rule.

"My gut felling, my hunch is yes we're going to be in Chapter 9. Yes, we're going to find out that however clumsily or hand-fistedly we got here, it wasn't in bad faith," said Graves.

Should Graves' hunch be off the mark, Plunkett Cooney bankruptcy practice chief and Local 4 expert Doug Bernstein says a finding of ineligibility would put Detroit back where it was in July with lawsuits flying and money getting short quickly.

"I think he will address every avenue where a creditor has raised an objection and it will be touched upon one way or another," said Bernstein.

There is much not only for Metro Detroit and the state of Michigan to digest from the ruling: Graves and Bernstein both say the city is headed for lots of other precedent-setting legal action.

"And now we're going to find out whether or not the federal bankruptcy code trumps the Michigan Constitution. My gut felling is it will," said Graves.


"After the court has determined that they're eligible, claims of appeal get field, but a resolution has been reached before an appeal has been argued," said Bernstein.

There likely will be a lot of pain for the city and its residents, one way or another.

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