Released: July 29, 2013

Why Detroit bankruptcy matters

Source: Danielle Kurtzleben - US News

With a federal judge quashing legal challenges that could have held up the Detroit bankruptcy, the process rolls on. Now might be time for public employees nationwide to take notice.

Among the lawsuits that U.S. Bankruptcy Judge Steven Rhodes ruled on this week was a challenge filed by city employees about pension cuts. That suit will be decided in federal court. The Michigan state constitution, however, explicitly prohibits cutting employees' accrued pension benefits. But since seven other state constitutions have similar language and plenty of other cities face fiscal difficulties ahead, bankruptcy experts say Detroit will be the case to watch in determining how future bankruptcies might play out.

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