Detroit

What Comes Next for Detroit's Bankruptcy Filing?

Complicated situation for the biggest municipal bankruptcy

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Chapter 9 of the federal bankruptcy code, which applies to municipalities, counties, and other public entities like school districts and utilities, differs from Chapter 11–which applies to corporations–in a few important ways.

First of all, it's much rarer, with fewer than 700 cases since the provision was created in 1937, and 36 since 2010. For that reason, case law is still being settled–although Chapter 9 gives a municipality much broader authority to rewrite union contracts, only after the bankruptcy of Central Falls, R.I. did it become clear that cities would have the ability to escape their pension obligations.