For months, Detroit has been on the verge of filing for bankruptcy, but bankruptcy attorney Kevin Orr has been fighting to keep the city afloat. Despite the preventative actions from the city, Chapter 9 remains an imminent possibility. Should Detroit file for Chapter 9 with the help of its bankruptcy attorney, it will become the largest municipal bankruptcy in the history of the United States. Currently, Alabama’s Jefferson County holds the title of America’s biggest municipal bankruptcy case, but that could change within the next few weeks.
Detroit Balancing in Bankruptcy Limbo
The size and scope of Detroit’s debt is what could create an extremely long and costly bankruptcy process, even with the help of its bankruptcy attorney. Since a judge from within Michigan could provide bias and create a conflict of interest, it is likely that a judge from out of state would handle the case should Detroit file for Chapter 9. Currently, the most likely candidate is a retired federal judge from Tennessee who is experienced in handling multiple Chapter 9 municipal bankruptcy filings.
By the time Detroit files for Chapter 9 with the help of a bankruptcy attorney, the city could spend tens of millions of dollars in legal fees. Part of the reason that Detroit hasn’t yet filed for Chapter 9 is because Kevin Orr, the city’s Emergency Manager who is best known as a bankruptcy attorney, has yet to recommend a Chapter 9 filing for the city. Orr is still fighting to find resolutions between the city and its creditors, and he has even begun the process of restructuring nearly $20 billion of the city’s debt.
Even with the help of a bankruptcy attorney, a Chapter 9 filing will present special complications for Detroit, as the city must continue providing for its 700,000 residents. Though the city hasn’t filed for Chapter 9 on the timeline that many thought it would, many legal and financial experts still believe that a Chapter 9 filing is unavoidable for the city of Detroit.