"The usual rule of thumb in bankruptcy is that federal trumps state. Winning the race to the courthouse is very important because of the automatic stay on lawsuits a bankruptcy filing delivers"
- Peter Henning, a professor at Wayne State University Law School
The city of Detroit, which has become the largest U.S. city to file for bankruptcy, is heading to its first day in court on Wednesday, even despite some lawsuits are trying to block a plan to restructure city's more than $18 billion in debt. Kevyn Orr, current Detroit's emergency manager, is seeking to put lawsuits challenging the bankruptcy filings on hold. Amid concerns that retirement benefits will be slashed, retirees, workers and members of pension funds from all over the city have been running to state court in an effort to derail the municipal bankruptcy.
Despite the current situation, property prices are rising, and according to a real estate website Zillow.com, the average home price in Detroit reached $12,500 in May, soaring 14.7% on annual basis, however, still below 2011 levels. Hence, the average sales price has jumped 18.1% in May from a year earlier, hitting $25,000.
The recent bankruptcy filing of the cradle of the nation's automobile assembly line is raising concerns about other U.S. cities, which are also dealing with billions in under-funded retiree benefits. Just a week earlier, Chicago's credit rating was revised down due to its $19 billion liabilities. Moody's Investors Service warned that Chicago, the nation's third-largest city is facing a tremendous strain, as it is trying to meet its future funding requirements.
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