Attorney Blasts The State For Standing In The Way Of Hamtramack Bankruptcy

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ATTORNEY BLASTS THE STATE FOR STANDING IN THE WAY OF HAMTRAMCK BANKRUPTCY

Cities such as Hamtramck and others may find real solution to financial crisis in Bankruptcy Court, Bankruptcy Attorney says
For Immediate Release – Thursday, November 18, 2010

Contact: Mike Greiner – 586-693-2000 * mike@financiallawgroup.com

Warren, MI – A prominent Detroit-area Bankruptcy attorney today blasted the State of Michigan for telling Hamtramck to borrow more money rather than filing Bankruptcy to restructure its finances. “This is another example of the State trying to paper over the problem rather than addressing the fundamental issue,” Attorney Michael Greiner said.
The foreclosure crisis has resulted in a crisis in local government – lower property values have resulted in lower property taxes for municipalities and school districts. But Greiner says that cities may be able to resolve their financial crises by filing Bankruptcy.
“Bankruptcy is a tool,” Greiner said. “When any entity, including a city, finds itself in financial trouble, the Bankruptcy Court is a place to resolve the competing interests in an organized way.”
Greiner, the former Deputy Mayor of Michigan’s third largest city, pointed out that there are some changes that can be made by filing Chapter 9 Bankruptcy that can’t be accomplished outside of Bankruptcy:

• The City can impose a reasonable settlement on its bond-holders: Governments borrow money by selling bonds. Many of these bonds were sold when times were good and the governmental entities expected to have the revenues to repay these bonds. But when times change, sometimes the pressure on municipalities to repay these debts is unrealistic. Pittsburgh used bonds to finance a new airport terminal for USAirways. But pressures on the airline industry have resulted in fewer passengers at Pittsburgh’s terminal than expected. The City has negotiated for some time with its bondholders to reduce its payments on these loans, and just recently it came up with a deal. But the deal is likely too little, too late, and the cost of repaying these bonds continues to put a severe strain on Pittsburgh’s finances. By filing Bankruptcy, the process could be resolved much more quickly by employing the powers of the Court.

• Cities can rely on the Court to help it make politically unpopular moves: It is often difficult for elected officials to take on the powers that be in their communities. The one-term Mayor of Washington, Adrian Fenty, lost his election after he worked to reform the educational system in his city. In Detroit, Mayor Dave Bing is struggling to reduce the services his city provides to residents to better match the funds available. Bing, however, is already running into opposition from a number of neighborhood groups. By going into Bankruptcy, a non-elected official, the Judge, balancing the interests of the City residents and the creditors, can impose service cuts or tax increases that elected officials find unpalatable. “The pressure elected officials are under to cater to unrealistic demands is intense,” Greiner said. “Court orders are a way to get something done that may be too controversial politically.”

• Bankruptcy Court can change benefit plans, union contracts if needed: Public sector employment is often governed by much more pro-employee laws than in the private sector. States such as Michigan, North Carolina and California protect public employee benefits and union contracts in ways that would be unacceptable in the private sector. But a Federal Bankruptcy Court has the power to overrule these laws if unions continue to make unreasonable demands. Baltimore has been struggling of late to reduce its pension obligations. There, some city employees have retired at less than 55 years of age earning a pension equal to as much as their full salaries while they worked. Vallejo, California already filed Bankruptcy to address these obligations, and Greiner believes more are on the way. “Pensions and benefit plans are a huge burden on local government,” Greiner said. “The unions use their political power in the State capital and with the City Council to stop reform. Those tactics won’t work with a Bankruptcy Judge.”

Greiner is the founder and President of the Financial Law Group, P.C., a Detroit-area law firm specializing in Bankruptcy

(www.financiallawgroup.com). He has represented thousands of individuals, businesses and creditors in Bankruptcy. He is also the writer of the recently-published Bankruptcy 101: An Insider’s Guide to Filing Chapter 7 Bankruptcy on your own without an Attorney, and he is the creator of the website myeasy7.com which assists individuals in filing Chapter 7 Bankruptcy without an attorney. He blogs at myeasy7.com/blog.