The other day I posted here on the increasing likelihood that the city of Detroit would eventually seek relief under Chapter 9 of the Bankruptcy Code. A friend dropped me a note that led me here to read about a change to Michigan law that will make it easier for Detroit to file. In most states, cities and other local governing entities are not free to file for bankruptcy unless specifically authorized by their state government. Whether that power is granted and exactly how it can be exercised varies widely among the states.
Regarding Detroit, late in 2012 Michigan's Republican governor signed Senate Bill 865 that provides that when a local government finds itself in a "state of financial emergency," its governing body has seven days to select one of four options, which include filing under Chapter 9. The remaining three options, while short of bankruptcy, will take power from the elected city council so at least one effect of this new law will be to make it easier for Detroit to file. If there's a financial emergency, no longer will its city council be able to veto such a move.
I believe the law will take effect at the end of March. Be prepared to read some news stories about Detroit and "financial emergency" shortly thereafter.
Regarding Detroit, late in 2012 Michigan's Republican governor signed Senate Bill 865 that provides that when a local government finds itself in a "state of financial emergency," its governing body has seven days to select one of four options, which include filing under Chapter 9. The remaining three options, while short of bankruptcy, will take power from the elected city council so at least one effect of this new law will be to make it easier for Detroit to file. If there's a financial emergency, no longer will its city council be able to veto such a move.
I believe the law will take effect at the end of March. Be prepared to read some news stories about Detroit and "financial emergency" shortly thereafter.
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