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Public labor unions ask court to toss out Detroit's bankruptcy filing

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August 24
8:04 AM 2013

Public labor unions asked a US court to throw out the bankruptcy protection filed by the City of Detroit. A union that represented Detroit's police and firefighters said Kevyn Orr did not hold negotiations in good faith. Orr was the emergency manager appointed by the state.

Chapter 9 of the US Bankruptcy Code stipulates that before a municipality or city government could be certified by a judge to proceed with its bankruptcy filing, it must prove that it had become insolvent. Detroit should also prove that it had already conducted good faith negotiations with its creditors. If there were too many creditors negotiations possible, the city should also show proof of such.

The city's two public pension funds and other unions also claimed that the bankruptcy filing could lead to a reduction of the retirement benefits of the city's workers. This would be unconstitutional, they said.The American Federation of State, County and Municipal Employees Council 25, also argued that the Detroit filing was a violation of the Constitution. The union argued that the Emergency Manager Law of Michigan on which the bankruptcy filing was based does not explicitly give protection to the retirement benefits of its public workers and was therefore unconstitutional.

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