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Bankruptcy law professor quoted in Crain's article analyzing emergency manager act in Detroit

December 17, 2012

Detroit's scramble for one last financial foothold before slipping into the hands of an emergency manager or a federal bankruptcy judge should gain intensity this week. The Legislature last week approved the Local Financial Stability and Choice Act, which gives communities four options to choose in the face of a state-determined financial emergency: accepting an emergency manager, filing Chapter 9 bankruptcy, going through mediation or entering a consent agreement similar to the one already existing between the state and Detroit. One thing a bankruptcy could do for the city that an emergency manager couldn't is discharge litigation claims, which can be considerable for a city of Detroit's size, said Laura Bartell, professor of bankruptcy law at Wayne State University Law School. "There are not a lot of successful Chapter 9 bankruptcies so far. It's a disaster, not just for municipalities, but the state. You can't liquidate cities; they have sovereign powers and you can't force them to raise taxes, although you can reject contracts in bankruptcy," she said.