CITY OF DETROIT BANKRUPTCY UPDATE

CITY OF DETROIT BANKRUPTCY UPDATE

On July 18, 2013, the City of Detroit filed for Chapter 9 bankruptcy protection.  This filing, among other things, put a hold on all grievances and other court filings that existed between AFSCME and the City of Detroit.  However, we continue to fight for our members by filing claims in the bankruptcy court. 

As the City of Detroit put together its plan of reorganization, it put all its debts into different classes as prescribed by federal law. Our (AFSCME’s) claims were placed into Class 14, along with many other unsecured creditors. We immediately went to work to fight for the rights of our members. Ultimately, we reached a settlement with the City of Detroit that resulted in a stipulated settlement in the amount of $95,380,410.00. However, under the terms of the plan, we will not receive all of what is owed. 

Under the terms of the plan, AFSCME members will receive a share of $20,000,000 that has been set aside for Class 14 claims. The exact amount of AFSCME’s payout will not be known until all the claims have been resolved and a dollar amount have been placed on their value. This is what has held up payment on our settlement for so long.

Originally, approximately 3,900 claims were filed within Class 14. The number of unresolved claims fell to approximately 100 as of November 2018 and has since fallen to approximately 50.  This includes several sizable claims by the United States Government. It is unclear how these claims will ultimately be resolved. Currently, the deadline to resolve all claims has been set by the Court at June 7, 2019. However, the City has indicated that they will be filing a motion to extend the deadline to December 7, 2019. The City hopes to resolve all remaining claims within that 6-month extension, but they cannot guarantee that will occur. Some of these claims are involved in active litigation, putting resolution in the hands of a judge and/or jury. 

If the City is successful in resolving these claims during the next extension, the city anticipates that distribution of funds will begin around the end of 2019. At that time, we will know how much of our claim will be paid. However, the method and timing of those payments will still need to be resolved.  The Plan of Adjustment currently anticipates paying these claims over the course of 30 years. Once we have a better sense of the size of the distribution, we will enter discussions with the City of Detroit regarding the method and timing of the distribution. It appears that an end is finally in sight, and the NEVER QUIT attitude from City of Detroit members and retirees will finally pay off!