Deadline to challenge Detroit's bankruptcy filing looms

Monday night marks the last time people can challenge the city on whether its municipal bankruptcy should be allowed to proceed.

NEW YORK (CNNMoney)

The deadline, set at 11:59 pm Eastern time on Monday night, marks the last time people will be able to formally challenge the city on whether the largest municipal bankruptcy in the nation's history should be allowed to proceed.

Detroit filed for bankruptcy last month when the state-appointed emergency manager Kevyn Orr and Michigan Gov. Rick Snyder said the city could not pay its $11.5 billion in liabilities associated with pension benefits, retiree health care costs and unsecured debt held by investors.

But the question of whether Detroit can qualify for municipal bankruptcy, known as Chapter 9, remains.

Related: Retired Detroit firefighter: "My pension is what I was promised"

Judge Steven Rhodes, who's overseeing the case in U.S. Bankcruptcy Court, now must to decide whether the city has proven that it's insolvent, and that it has negotiated in good faith with creditors.

Only a handful of creditors have filed objections so far, all arguing that the city does not qualify for Chapter 9. More are expected to roll in as the day goes on.

Some of the arguments contend that the bankruptcy violates a provision of the Michigan constitution that prohibits cutting pension and retirement benefits.

In addition to arguing that it's unconstitutional, public employee unions have charged that the city did not negotiate in good faith, and should not be allowed to walk away from obligations made to employees and retirees.

While the deadline to object to Detroit's filing is fast approaching, the question of whether Detroit can qualify for Chapter 9 won't be taken up in court until October.

First Published: August 19, 2013: 9:39 AM ET

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