Detroit Eligibility Trial Begins

October 24, 2013 – In The News
The Deal Pipeline

Michael Sweet was quoted in The Deal Pipeline article "Detroit Eligibility Trial Begins." While the full text can be found in the October 24, 2013, issue of The Deal Pipeline, a synopsis is noted below.

The city of Detroit has begun its attempt to prove that it is eligible to remain in bankruptcy despite opposition from some creditors and residents.

Michael Sweet said the biggest challenge for the city will be satisfying the requirements of section 109(c)(5) of the Bankruptcy Code.

According to Sweet, the court will examine whether Detroit negotiated with creditors in good faith or if the bankruptcy filing was a “done deal” when emergency manager Kevyn Orr was appointed.

The extent of the negotiations and whether a filing was preordained “are the two components that are going to be in play … It’s a subjective analysis, and I think that at the end of the day, the court is not going to rule the city ineligible on either of those two points,” Sweet said.

“I think it’s highly likely that the court finds the city of Detroit eligible to file for bankruptcy under [the Bankruptcy Code], but that’s by no means the end of the case. It’s really just the beginning,” Sweet said. “I think the court’s initial analysis will find that the city is eligible, and they will move on to the next part of the case, which is getting a plan confirmed, and that is going to be much tougher.”