Detroit Submits to the Proposed Bankruptcy Plan

The city of Detroit recently put a debt-cutting plan to a vote late Monday afternoon in the hopes to overcome the city’s bankruptcy issue. The city’s retirees and active employees were welcome to participate in the vote, and after all ballets were cast and accounted for, the city’s proposal passed.

Now, a new chapter awaits the city after an 82 percent approval from police and fire retirees and 73 percent of general pensioners gave the OK for what government officials are calling the “grand bargain.”

Although the proposal still needs to be officially approved by a bankruptcy judge, the plan includes a 4.5 percent pension cut for most retirees, along with the loss of annual inflation adjustments. For retired police officers and firefighters, they will lose a chunk of their annual cost-of-living raise. The biggest hit is the $816 million taken from the state of Michigan, and Detroit’s foundations as well as the Detroit Institute of Arts.

However, city officials are more than happy with the decision to make a huge dent in the city’s debt. Detroit emergency manager and the man behind the “grand bargain,” Kevyn Orr explained that th results were a “positive decision” for pensioners and the city alike.

“The voting shows strong support for the City’s plan to adjust its debts and for the investment necessary to provide essential services and put Detroit on secure financial footing,” Orr explained.

Though this may be helpful, some citizens may not feel its effects for quite some time. Roughly 1.1 million households in the U.S. file for bankruptcy every year, which is roughly one out of every 70 households. Those who file for either chapter 7 or 13 bankruptcy (62% of filings) are under financial burden due to not being able to cover the cost of illness treatments or medical bills, according to the American Journal of Medicine.

“If an entity as large as Detroit with such massive financial problems can receive help with their bankruptcy, think of what bankruptcy can do for an individual,” says Dave, Legal Assistant at Weik Law Office. “Bankruptcy can help with cash flow issues because it stops all collection attempts, and even helps with tax issues involving the IRS. Bankruptcy can be a very positive tool that helps to curb debt issues and helps individuals and even Detroit start again positive.”

The results of the vote were published in a 371-page document bankruptcy judge Steven Rhodes was set to review. Rhodes also addressed the issue of water shutoffs around the city where nearly 30,000 low-income households were withheld water at took to filing a lawsuit against the city.

Rhodes instilled a 15-day water shutoff moratorium, which will hopefully give households enough time to look for and choose a payment plan that works best for them in order to continue receiving water. The city’s water department cut services to over 7,000 homes last month, a staggering increase from the 1,500 last year at that time.

Leave a Reply

Your email address will not be published.