A federal judge approved Detroit’s bankruptcy exit plan on Friday, erasing $7 billion of the city’s $18 billion debt.
U.S. Bankruptcy Court Judge Steven Rhodes ruled that
the plan, months in the making, was fair and feasible, the Detroit Free Press said.
In addition to getting rid of $7 billion in unsecured liabilities, Rhodes approved reinvesting $1.4 billion over 10 years in services.
In live updates from the scene, Free Press reporters said it was expected the plan would be approved because many of the city’s creditors were on board and experts deemed the plan feasible.
Spared in the bankruptcy plan were the city’s retirees, who were protected, Bloomberg Businessweek said, and also the Detroit Institute of Arts, which creditors had said at one point should divest itself of its works to pay the debt.
The Detroit bankruptcy case was the largest municipal bankruptcy ever to occur in the United States.
The city was much-criticized on a national level for mismanagement and policies that put Detroit in a bad financial position.
In a statement, Detroit Regional Chamber President and CEO Sandy K. Baruah said the way the bankruptcy was handled will change perceptions but tough times still lie ahead.
“Detroit is on the cusp of a new era and primed to reinvent itself in a way many people did not think possible. Exiting bankruptcy so effectively and thoughtfully has wiped out decades of mismanagement and created a historic opportunity to move the city without mortgaging its future,” she said. “As we celebrate today, it’s important to stress that this is only one step in the process. Bankruptcy did its job and balanced the books, but it’s not the end goal. Building on the progress already made under Mayor Duggan, and maintaining discipline with city finances and operations over the long-term is critical to building off this historic effort. Today is a great day, but a lot of hard work remains.”