Bankruptcy Court Asserts Sole Jurisdiction

Judge Steven Rhodes
Judge Steven Rhodes held the first hearing today in Detroit’s historic bankruptcy filing.  During the hearing the judge entertained two motions filed by the Emergency Financial Manager of the City of Detroit.  The first motion was a motion for a “comfort order” to verify that the bankruptcy stay protecting the City of Detroit is in place and that the City of Detroit is protected from further lawsuits.  The second order was a motion to “extend the stay” or more accurately to expand the stay to cover the Governor, the Treasurer and other state officials from any lawsuits related to the filing of the Chapter 9 Bankruptcy.  The judge took arguments from the City of Detroit as well as each of the objecting creditors.  The judge also allowed comments from a few parties that had not objected.  After a rebuttal argument from the city of Detroit the judge adjourned to allow himself time to deliberate.
Kevin Orr
Judge Rhodes returned to the bench at 2:00pm to issue his ruling.  In regards to the first motion, Judge Rhodes ruled that the stay was in effect.  This portion of the ruling was a forgone conclusion as the provisions of the bankruptcy code are clear.  As part of his determination that the bankruptcy stay was in effect, the judge ruled that Detroit’s Emergency Financial Manager Kevin Orr, an official created under state law rather than city charter and appointed by the governor as opposed to elected by the residence of the city, is a city official under the bankruptcy code and therefore protected by the bankruptcy stay.
 
Governor Rick Snyder
The judge also granted the motion to expand the stay to cover the Governor and the Treasurer.  In his ruling the judge stated that the cases against the Governor and the Treasurer were so inextricably interwoven that the city could not receive relief unless the stay extended to the Governor and the Treasurer.  In his ruling the judge asserted that the bankruptcy code provides the bankruptcy court with exclusive jurisdiction to determine eligibility to be a bankruptcy debtor under Chapter 9.  In ruling that the court has exclusive jurisdiction, the court in essence ruled that the state court has no jurisdiction to review the actions of the state’s sitting governor in order to determine if those actions complied with the state constitution.  Instead the federal bankruptcy court will be the venue in which the governor’s actions will be reviewed.  In his ruling the judge acknowledged that if the case in state court were allowed to go forward, the state court may reach a different conclusion than the federal bankruptcy court thus creating confusion.
What the ruling failed to recognize is that while the state court case would have an affect on the outcome of the federal court decision, the two cases and legal determinations are not in fact the same.  The state court case was intended to review the actions of the Governor.  The federal court case is meant to review the eligibility of the City of Detroit to be a Debtor under Chapter 9.  Certainly the state court is a better forum to review the constitutionality of the actions of the governor under the state constitution.  The State of Michigan was deprived today of a right to review the actions of its own governor in light of its own Constitution.  That is a blow to states’ rights and to the basic concept of federalism.  It is very likely that the case will be appealed.
Second Chance Legal Services is a bankruptcy law firm located in Madison Heights, MI.  While we are located in Oakland County, we service Wayne, Oakland and Macomb County residents.  As Detroit Bankruptcy Attorneys we specialize in helping individuals escape their burden of debt in order to get a fresh start on their bright future.
Because of our small size our clients get individual attention.  You will have the same bankruptcy attorney throughout your case whether you are in a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy.  Your attorney will help guide you through the bankruptcy process in order to help you get a successful discharge of your debt.
It is important to note that Macomb County Bankruptcy Attorneys, Oakland County Bankruptcy Attorneys and Wayne County Bankruptcy Attorneys all deal with the same judges and trustees.  This is because all Michigan Bankruptcies are filed with the federal bankruptcy court in Detroit, MI.  For this reason, it is important that you choose an attorney not by location but rather by how comfortable you feel with them when you meet.  If you don’t feel comfortable with their knowledge, their experience or their demeanor you should seek out an attorney that you do feel comfortable with.
If you are interested in speaking with a Detroit bankruptcy attorney from Second Chance Legal Services, please contact our office at 248-629-6367 for a free initial consultation.