On the day of his appointment as the City of Detroit’s emergency financial manager, Kevyn Orr referred to the herculean task of fixing the city’s balance sheet as the “Olympics of Restructuring.” In order to earn the gold medal, Mr. Orr has filed the largest Chapter 9 municipal bankruptcy in U.S. history. This article discusses some of the key aspects of Chapter 9 and explores the significant differences between Chapter 9 and Chapter 11 business reorganizations.
Many in the business community are all too familiar with Chapter 11 bankruptcy after the economic strife that the region, and particularly, the auto industry, experienced over the past decade. However, business leaders and professionals in the region have had little or no experience with Chapter 9 proceedings. The only Chapter 9 case filed in the U.S. Bankruptcy Court for the Eastern District of Michigan involved a small community hospital authority.