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Pensioners, Bondholders, And Unfair Discrimination In Municipal Bankruptcy, Andrew B. Dawson
Detroit recently confirmed its plan of debt adjustment under which the city has endeavored to adjust its pension obligations. The court's confirmation order and oral opinion on the record present what is perhaps the most significant decision regarding a key question facing any city attempting to adjust pensions in bankruptcy: can a city propose to pay its pension claimants significantly more than its other unsecured creditors? This question involves interpreting the Bankruptcy Code's unfair discrimination rule.
The Detroit bankruptcy court applied a novel interpretation of unfair discrimination, eschewing the relatively thin body of case law interpreting this rule ...