On July 18, 2013, the city of Detroit, MI, filed for Chapter 9 bankruptcy, becoming the largest municipal bankruptcy in the history of the United States. Through Chapter 9, Detroit will be able to restructure its $18-20 billion in debt and create a strategy for future growth and recovery. The city’s emergency manager and experienced bankruptcy attorney Kevyn Orr says that the city will file a proposal for the adjustment of debts by January 2014.
As the city comes to terms with its debt, city workers are facing a tough situation. The General Retirement System and Police and Fire Retirement System have left tens of thousands of employees in Detroit without pension funds. Included in the city’s $18-20 billion debt is $3.5 billion in liability due to pension funds.
Kevyn Orr ordered a stay on the pension freeze that was ordered last month. This means that current and retired city workers will be able to enjoy their pension plans even as the city resolves its Chapter 9 bankruptcy. Orr acknowledges the slow process and lack of progress between pension plan representatives and the city of Detroit. Still, he says that the city’s workers and citizens shouldn’t be financially punished because of the city’s financial emergency.
According to Kevyn Orr, ensuring the appropriate handling of pension funds is critical to essential services and public safety. Pension talks include Kevyn Orr, pension plan representatives, Treasury and department heads, and many more parties. With experience as a bankruptcy attorney, Orr understands the various options the city has to restructure its debt. With proper management, the shutting down of pension plans should only happen in the most desperate situation.