CHICAGO, Dec. 3 (Xinhua) -- A federal judge on Tuesday ruled that Detroit is eligible for Chapter 9 bankruptcy protection, but at the cost of pension cuts.
U.S. Bankruptcy Judge Steven Rhodes determined that the city meets the criteria for bankruptcy, ruling that Detroit is financially insolvent and that the filing was properly authorized. He dismissed challenges to Michigan's emergency manager law and ruled that pensions are not protected by the state Constitution.
More importantly, Rhodes ruled that Detroit pensioners do not have any additional protections outside of normal contract rights to their benefits. The city could slash those retirees' benefits, he was quoted by the Detroit News.
According to Rhodes, the city did not negotiate in good faith with its creditors, a key point of contention in the eligibility fight. But he also admitted good faith negotiations were not necessary because of the number of creditors, more than 100,000, adding the sheer size of the debt and the number of creditors make it "impracticable" for Detroit to negotiate.
Representatives for American Federation of State, County and Municipal Employees, the city's largest union, immediately filed a notice of appeal to the Sixth Circuit Court after the ruling.
The White House on Tuesday reiterated its previous statements on Detroit, saying nothing has changed with the judge's eligibility ruling. The White House has steadfastly ruled out any federal bailout for Detroit.
The city of Detroit filed for Chapter 9 bankruptcy protection in federal court on July 18, 2013, making it the largest city in the U.S. history to file for bankruptcy. In the petition, Detroit sought bankruptcy protection from creditors and unions who are renegotiating 18.5 billion dollars in debt and other liabilities.
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