(Reuters) - A federal judge on Tuesday ruled Detroit is bankrupt, which clears the way for potential cuts to the city workers' pensions and could mean steep losses for the city's bond holders.
The following is a summary of key points in the ruling:
- The city of Detroit is insolvent and eligible to file for municipal bankruptcy under Chapter 9 of the federal bankruptcy code.
- Detroit did not conduct good-faith negotiations with unions and other creditors prior to its July 18 bankruptcy filing.
- Facing more than 100,000 creditors, it was not possible for Detroit to negotiate in good faith with so many creditors.
- Chapter 9 of the federal bankruptcy code is constitutional both because of a prior U.S. Supreme Court ruling and because Michigan's approval of the filing gives the state a say.
- Governor Rick Snyder's approval of the bankruptcy filing means Detroit can treat pensions like contracts and adjust their terms, despite protections in the state constitution.
- Michigan's approval of Detroit's bankruptcy filing complies with the state constitution, despite challenges to a state law that provided the road map toward bankruptcy.
Source: U.S. District Court for the Eastern District of Michigan
(Reporting by David Greising; Editing by Lisa Shumaker)