Al Jazeera America investigates overlooked stories of Detroit’s creditors
One unique aspect of bankruptcy is how, upon filing, all lawsuits against the debtor immediately stop. In Detroit’s case, after filing for Chapter 9 bankruptcy last summer, more than 500 lawsuits filed by ordinary people came to a halt. As Al Jazeera America notes today, the effect of this in a few particular instances is huge.
Like pensioners and bondholders, these tort claimants are unsecured creditors who can walk away from the bankruptcy with only a small fraction of what they are owed as the city seeks to resolve its mammoth debt. But unlike pensioners and bondholders, they have been excluded from the process, given no seat at the table in the high-stakes negotiations over Detroit’s bankruptcy or the plan that has them taking a staggering 80 percent cut.
It’s well worth a full read and shows an under-reported side to Detroit’s historic bankruptcy.