Now that Detroit’s filing for bankruptcy, what’s next?

Many people may be unfamiliar with Chapter 9 bankruptcy, in part because they are filed infrequently. With more than $18 billion in debts, Detroit’s recent Chapter 9 filing is the largest in U.S. history.

Here are the next steps in the Motor City’s Chapter 9 bankruptcy process:

By the end, the city will need to win support from creditors for its reorganization plan. With enough support, the city can emerge from bankruptcy. If not, it may have to continue negotiating with creditors.

Alternatively, Orr could pursue a “cram down” procedure, which would require winning support of a minority of creditors and convincing a judge that dissenting creditors aren’t being reasonable. Many think this path is more likely.

Whatever happens, Detroit faces a long road to financial recovery. As with other Chapter 9 bankruptcies, the Motor City’s bankruptcy case could take anywhere from several months to years to resolve.

Related Resources:

  • Why Business Is Cheering Detroit’s Bankruptcy (Forbes)
  • Detroit Bankruptcy is Largest Ch. 9 Filing in US History (FindLaw’s Courtside)
  • What Stockton’s Bankruptcy Means for Residents (FindLaw’s Law and Daily Life)
  • Bankruptcy Overview (FindLaw)

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