United States Bankruptcy Court for the Southern District of Michigan
504 B.R. 97 (2013)
The city of Detroit (debtor) was insolvent and filed for bankruptcy under chapter 9 of the bankruptcy code. A number of municipal pension plans (creditors) had accrued pension benefits owed to plan members, which formed some of the city’s debts. These pension benefits would be affected by the city’s bankruptcy. The Michigan constitution provided that accrued pension benefits were contractual obligations, and that pension plan benefits could not be impaired or diminished. Michigan, however, allowed insolvent municipalities to participate in chapter 9 bankruptcy. The pension plans objected to the bankruptcy proceedings, alleging that Detroit was barred by the state constitution from impairing the plan benefits and that any diminishment in plan members’ rights would violate the Tenth Amendment to the United States Constitution.
Rule of Law
Holding and Reasoning (Rhodes, J.)
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