Judge Orders Detroit’s Bankruptcy Be Withdrawn

July 22, 2013 (PLANSPONSOR.com) – A Michigan judge has ordered that Detroit’s federal bankruptcy filing be withdrawn to protect retirement benefits.

Judge Rosemary Aquilina of the Ingham County Circuit Court ruled last Friday that Michigan Governor Rick Snyder and Detroit Emergency Manager Kevyn Orr violated the Michigan state constitution, according to the Detroit News. Aquilina said that while state law guards against retirement benefits being diminished, she cautioned there will be no such protection in federal bankruptcy court.

In speaking about her ruling, Aquilina said in the news report, “It’s absolutely needed.” She recommended that Snyder review the relevant portions of the state constitution and hoped that he would reconsider his actions after doing so.

In response to the ruling, Michigan Attorney General Bill Schuette filed an application for an appeals court consideration on behalf of Snyder. According to the news report, Schuette asked the appeals court to put a hold on present and future lower-court proceedings and is planning to seek emergency consideration to expedite the process.

Prior to the bankruptcy filing last week, Detroit’s two pension systems (the General Retirement System and the Police and Fire Retirement System) filed a lawsuit against Snyder and Orr to prevent it. Orr has proposed to restructure Detroit’s debt and cut the pension benefits of thousands of city employees. (“Pension Systems Oppose Detroit’s Bankruptcy”).