Next move in Detroit bankruptcy happens Wednesday

A federal judge on Monday pushed the first hearing in Detroit’s bankruptcy case to Wednesday, when a ruling could be made to freeze any lawsuits from the state contesting the bankruptcy.

It’s the latest move in a showdown between government officials and retired city works.

On Thursday, Detroit Emergency Manager Kevyn Orr filed bankruptcy in federal court on behalf of the embattled city. On Friday, a Michigan court issued an order to withdraw the filing on state constitutional grounds.

At Orr’s request, U.S. Bankruptcy Court Judge Steven Rhodes agreed to the expedited hearing on Wednesday.

If the court grants a hold on the lawsuits, top Michigan state officials, Orr and others would be protected from litigation regarding last Thursday’s bankruptcy petition.

The heads of two of the city’s public labor unions, the United Auto Workers and American Federation of State, County and Municipal Employees Council 25, addressed alleged constitutional violations involving Detroit’s bankruptcy petition at a news conference on Monday.

The leaders allege that Orr did not negotiate with all of the 33 unions in a coalition representing most of the city’s civilian workforce before approving a bankruptcy filing for the city.

Retired city employees have been scrambling to protect their pensions and health benefits since Orr and Michigan Governor Rick Snyder approved a bankruptcy filing for Detroit last Thursday.

Al Garrett, president of the umbrella organization representing the city’s unions, contested statements by Orr that he “bent over backward” to work with creditors, including the city’s pension funds, before filing a bankruptcy petition for Detroit in federal court.

Orr said on Friday he suspected the city will face an eligibility fight, which would also include whether or not the city made a good faith effort to negotiate with creditors over its debt, Reuters reported.

Legal experts have said they expect the federal judge to put state litigation on hold, allowing those plaintiffs to use the federal court to argue why Detroit should not be allowed to file for bankruptcy.

Concerned that retirement benefits will be slashed, Detroit retirees, workers and pension funds have been petitioning state court in Michigan’s capital of Lansing in an effort to derail the biggest Chapter 9 municipal bankruptcy in U.S. history.

Groups representing the 20,000 retirees reliant on pensions successfully petitioned a county court to effectively freeze the bankruptcy process – but city and state officials say the ruling will not affect their plans.

Workers have clashed with Orr, a corporate lawyer who worked previously in Washington, D.C., and Gov. Snyder – a Republican unpopular in the largely Democrat city.

Orr has promised retired city workers that they won’t see cuts to their pensions or health benefits for at least six months. But, on Sunday, he said they would have to be cut eventually.

“There are going to be some adjustments,” Orr said on Fox News Sunday. “We don’t have a choice … This is a question of necessity.”

Detroit, a former manufacturing powerhouse and cradle of the U.S. automotive industry, has struggled for decades as companies moved or closed, crime became rampant and its population shriveled by about 25 percent in the past decade to 700,000.

The city’s revenue failed to keep pace with spending, leading to years of budget deficits and a dependence on borrowing to stay afloat.

About half of Detroit’s debt, $9.2bn, represents pension and health benefits – which the city now says it cannot pay. The remaining debt is largely to bondholders.

Small cities that have gone bankrupt have seen significant cuts to retirees’ benefits in the past.

Al Jazeera and wire services