US judge: Detroit’s bankruptcy is allowed to go forward

A federal judge handed a big win to Detroit's attempts to declare bankruptcy by sweeping away several legal challenges to the case.

Judge Steven Rhodes of the United States Bankruptcy Court said that the city would suffer irreparable harm if delays to its bankruptcy were upheld, The Detroit Free Press reported.

Lawyers for pension funds, unions and several of the city's other creditors filed challenges to try and stop the city from filing for Chapter 9.

"If these actions are not stopped, the city would be irreparably harmed. … These litigants will have due process. They will have their day in court," Detroit attorney Heather Lennox said during two hours of arguments by the city, pension funds and unions.

Instead, Judge Rhodes decided Wednesday to freeze all litigation against the city during the bankruptcy process, allowing the largest municipal bankruptcy in American history to go forward.

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Rhodes also froze any lawsuits against Michigan's governor, state treasurer and Kevyn Orr, Detroit's state-appointed emergency manager who filed for the city's bankruptcy.

The ruling is a big win for Detroit after an Ingham County judge said last week that Gov. Rick Snyder violated the Michigan Constitution, ordering Orr to withdraw the federal bankruptcy petition.

Snyder and Orr said that a bankruptcy filing was their only option to resolve the more than $18 billion the city holds in debt and unfunded liabilities.

The city's debts include $5.7 billion in liabilities for healthcare and other retiree benefits and a $3.5 billion pension liability.

Retirees and city employees are concerned about the impact bankruptcy will have on their pensions.

"It seems as though we're going to end up being the patsy for a lot of bad decisions that have been made over the years," Lt. James Edwards, who has worked 18 years at the fire department, told the Associated Press.

"You base your life decisions on promises made to you when you came on the job."

The next conference on the case is scheduled for Aug. 2.