Judge rules Detroit can proceed with bankruptcy reorganization

Detroit is eligible to shed billions in debt in the largest public bankruptcy ever in the United States, a federal judge ruled Tuesday, according to the New York Times.

Judge Steven W. Rhodes ruled the Michigan city met every test of insolvency, including an inability to pay its debts and provide basic services to its 680,000 residents.

 “This once proud and prosperous city can’t pay its debts,” Rhodes said. “It’s insolvent. It’s eligible for bankruptcy. But it also has an opportunity for a fresh start.”

In his ruling, Rhodes cast aside objections from unions, pension funds and retirees, which, like other creditors, could lose under any plan to solve $18 billion in long-term liabilities, including $3.5 billion in unfunded pension obligations. The ruling makes the possibility of reduced public pensions a reality during the reorganization process, even though the state's constitution protects them, the Times reports.

Read more from the New York Times.