Judge Steven Rhodes of the United States Bankruptcy Court for the Eastern District of Michigan approved the Detroit plan to cut $7 billion of its $18 billion in debt, according to The New York Times. The city will also invest approximately $1.7 billion into services to help revitalize the downtown area and stimulate economic growth. Rhodes found the plan to be fair, feasible and in the best interest of the city's creditors - the test for a plan of restructuring.
"Getting this resolved is a huge issue in terms of creating a great environment for the city, and not just the city but for the state, to all rally on focusing on growing Detroit," said Gov. Rick Snyder of Michigan, according to the news source. "It really takes care of the city government issue and gets a normal context to be a more traditional government structure again."
While there is generally a 14-day period after a judge approves a plan of restructuring to allow objectors to file appeals, Detroit has asked that Rhodes waive this period to allow it to begin enacting the plan immediately, The Detroit News reported. While this would be unusual, the city has already reached mutual agreements with many of its creditors.
Rhodes noted the difficulties that would be faced as a result of the bankruptcy, particularly those of city retirees who have had their pensions reduced, according to the news source. However, he also praised some elements of the plan, including the so-called "Grand Bargain" that gives Detroit money for the pension fund in exchange for spinning off the Detroit Institute of Art into a public trust.
"To sell the DIA art would be to forfeit Detroit's future," Rhodes said. "The city made the right decision."