Detroit Bankruptcy Judge Sets Fast-Paced Hearing Schedule

CHICAGO — The federal bankruptcy judge overseeing Detroit's Chapter 9 case filed an eight-month schedule of key hearings Tuesday ahead of a March deadline for the city to file its final plan of adjustment.

Judge Steven Rhodes filed a hearing schedule that begins with an Aug. 19 deadline to file objections to the city's eligibility for Chapter 9 protection.

A trial on the city's eligibility — among other things, the city needs to demonstrate insolvency in order to move forward with its bankruptcy request — is set for Oct. 23. Additional trial dates are set aside through Nov. 8 if necessary.

The judge set a March 1, 2014 date as the deadline for the city to file its plan of adjustment.

"I think setting eight months out is hopeful, and I think this is the court's way of relaying to the parties that it expects progress to be made and it does not intend to allow this case to remain on its docket any longer than it needs to," said John Gregg, a partner at Barnes & Thornburg who has written papers on the Detroit case. "In other words, it's a motivation tactic."

Since filing Detroit's bankruptcy petition July 19, the city's emergency manager, Kevyn Orr, has said he wants a fast-track proceeding that allows the city to emerge by the time his tenure is up, in the fall of 2014.

Gregg said a late 2014 conclusion is "extremely optimistic."

The action, since overturned, by an Ingham County judge who ordered the city to withdraw its petition hint of future eligibility battles, Gregg said. The question of whether the city negotiated with creditors in good faith ahead of its filing — as well as during the bankruptcy — is likely to be a key eligibility question.

If Rhodes rules Detroit is eligible for Chapter 9, the city and its creditors will likely spend the next few months in a fresh round of negotiations to try to hammer out settlements. "In this case, with the powers of the bankruptcy code behind it, the city may be a bit more optimistic in reaching agreements," Gregg said.

If negotiations fail, the long court battles will likely begin after the city files its adjustment plan. The next hearing is set for Friday, where Rhodes will consider any objections to his schedule as well as other motions.

Also Tuesday, bond insurer National Public Finance Guarantee Corp. filed a notice of appearance and request for documents. The firm is being represented by Sidley Austin LLP.

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