Detroit's filing under Chapter 9 of the federal bankruptcy code may be "a game changer" that resolves controversial issues that have not been dealt with in prior cases, according to a nine-page paper on muni defaults and bankruptcy released on Thursday by Bond Dealers of America.

The Detroit proceeding may answer the question of whether a municipality can use Chapter 9 to cut accrued pension rights that are protected by a state constitution, said the paper, which was prepared for BDA by Nixon Peabody, LLP. Michigan's Constitution states such rights "shall not be diminished or impaired."

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