Costs for bankruptcy in Detroit reach $36 million

It’s costing Detroit a great deal of money to save their city from financial ruin. Reuters reports the cash-strapped city has spent a whopping $36 million in fees and expenses in the last six months. The costs for bankruptcy report filed Tuesday with the federal court-appointed fee examiner lists expenses for a team of lawyers and consultants.

The highest amount spent is for the last quarter which extended from October to December. The report states that professional services during this time period cost almost $22 million. But this is just the beginning, according to those close to the case. In fact, the costs for bankruptcy are likely to skyrocket for this reporting period which stretches from January to March 2014. In this period there has been a team of financial experts working feverishly to complete Detroit’s bankruptcy repayment plan, which will outline how the city plans to repay or adjust an estimated $18 billion of debt.

Orr hopes costs for bankruptcy will not reach $100 million


In a recent interview with the city’s state-appointed emergency manager, Kevyn Orr, he voiced concerns that the costs for bankruptcy are likely to be much higher, and he hoped, “the bankruptcy’s final price tag will not reach the hundreds of millions of dollars.”

Detroit’s bankruptcy is the largest in U.S. history and is likely to cost the most, but there have been other bankruptcies which have also been very expensive. For instance, prior to Detroit, Jefferson County, Alabama, was the largest municipal bankruptcy, and they spent an estimated $25 million.

Why have costs for bankruptcy been so high for Detroit?


One of the more costly expenses last quarter, which Robert Fishman, the fee examiner in Detroit’s case, termed “substantial,” were a result of the trial to determine whether Detroit was eligible to file bankruptcy. Ultimately the bankruptcy judge determined the city could file bankruptcy, although this decision is being challenged in an Appeals Court.

Costs for on-going mediation and hearings have also increased the costs and is likely to continue as Detroit continues their negotiations with other creditors. Fishman also noted that while the fees were substantial, he didn’t believe they were unnecessarily high and were to be expected given the complexity of the case, the speed of the case, and the level of professionals needed to settle certain financial and legal issues.

Costs for bankruptcy paid to Orr’s former law firm


Jones Day, Orr’s former law firm, is leading the efforts in Detroit and has benefited the most, earning an estimated $16.61 million in fees and $733,522 in expenses since July, according to the examiner’s report.

In other news, Reuters also reports Judge Steven Rhodes, who is overseeing Detroit’s bankruptcy, will allow thousands of creditors to vote on the debt adjustment plan that he reviewed on Monday. The next step in the Detroit bankruptcy is for the judge to determine if Detroit’s bankruptcy readjustment plan is “fair and feasible.” The confirmation should begin on July 24, 2014.

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Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.