First court hearing on Detroit Chapter 9 bankruptcy set for Wednesday

DETROIT (WXYZ) - The first court hearing in the Detroit Chapter 9 Bankruptcy case is set for 10:00 a.m. Wednesday in Federal Court in downtown Detroit. 

Judge Steven Rhodes is expected to deal with the biggest challenge to the bankruptcy, a case pending in state court that includes an order to stop the Chapter 9 proceedings, quickly. He is expected to rule on the challenge brought by the city's 30,000 active and retired workers either Wednesday or Thursday.

The order for Governor Rick Snyder to stop the Detroit Bankruptcy case on the grounds it violates the Michigan Constitution, which protects public employee pensions from being cut, was issued in Ingham County on Friday.

It is being appealed to the Michigan Court of Appeals. No hearing has been set on the appeal in the state system. 

Rhodes has already issued an order saying he has jurisdiction in the case. Federal law prevails over state laws when there are conflicts.

Wednesday's hearing is being moved from bankruptcy court to the main federal courthouse, because interest is so high. Three overflow rooms are being set up for spectators and media to watch on closed circuit TV. However, no media cameras will be allowed in.

The Detroit pensions are underfunded by $3.5 billion and the two Detroit city employee pensions face cuts in the Chapter 9 proceedings. 

If Judge Rhodes rules against the retirees, they can still appeal. 

Experts say any ruling will be huge, because it will set a legal precedent that could make all public employee pensions vulnerable where other cities are in financial trouble.

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