Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comFirm Insights
Silent victims in the Detroit bankruptcy filing
Author: Joel R. Glucksman
Date: May 9, 2014
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As the city of Detroit nears a final decision in its bankruptcy case, its pension boards and retirees’ group have reached a tentative agreement that may help the city to get out of Chapter 9 by the end of the year, according to The New York Times. By emergency manager Kevyn Orr’s estimation, the city holds liabilities of approximately $18 billion, which it seeks to cut through the filing. Through the use of a so-called ‘cram down,’ Detroit does not need an agreement with all of its over 100,000 creditors. Instead, it can leverage an agreement with one class of impaired creditors to push other creditors into accepting the plan.
In a recent extended piece, Al Jazeera America examined some of the creditors who are left with little power to negotiate – tort creditors. These creditors are owed money based on the city’s civil wrongdoing, and can generally expect to receive just 20 percent of what they are owed by the city.
One such creditor is Jesse Payne, a woman who in 2012 was run over by a city bus, according to the news source. Her legs were “de-gloved,” leaving her without skin and a dire prognosis. Despite doctors’ expectations, she survived and retained her legs, but never received the $3.5 million owed to her in judgments and settlements after a drawn out case with the city. Another creditor is Dwayne Povience, who was wrongfully imprisoned for almost a decade on murder charges after police coerced a homeless man into testifying against him.
These creditors, of which there are over 500, are generally low income, and due to the differences between their cases have little hope of coordinating, Al Jazeera America explained. Though Orr declined to comment for the story, he did acknowledge that, “reaching a consensual resolution and getting someone to understand that they have to give up expectations … that’s a difficult call.”
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