DETROIT (AP) — The city of Detroit said Monday it needs more time to wrap up critical deals with creditors before it will be ready to officially emerge from bankruptcy.

A judge had signed off on Detroit’s reorganization plan on Nov. 7, but didn’t specify a formal end date. Detroit now says it could be ready by Dec. 8, and Judge Steven Rhodes set another hearing for Dec. 15.

Q: Why is an exit date important?

A: Detroit is poised to borrow $275 million from Barclays Capital, much of it to pay off other obligations and to start improving city services, when it is released from Chapter 9. The debt eventually will be turned into bonds carrying an interest rate of 4.75 percent or less and will be backed by income tax revenue. The final documents are being wrapped up, attorney Heather Lennox said Monday.

“The city is more credit-worthy than it would have been 18, 19 months ago because the balance sheet is cleaned up for the first time in a great while,” said Doug Bernstein, a bankruptcy expert.

Indeed, emergency manager Kevyn Orr compared the city’s past borrowing to getting fleeced at a “payday loan store.” Detroit is erasing $7 billion of debt in bankruptcy.

Q: Why wasn’t Detroit immediately released from bankruptcy when the plan was approved?

A: John Pottow, a professor at the University of Michigan law school, compared it to buying a house. A buyer and seller reach an agreement but it still takes days or weeks to close the deal. In this case, it involves a series of compromises with creditors and other parties.

“The city has won,” he said. “But you don’t get the house until you have the closing.”

Rhodes will have no patience for long pauses. On Nov. 12, he said Detroit can’t afford delays in regaining solvency.

Q: Pension cuts of up to 4.5 percent are a big part of the plan. How soon will they take effect?

A: Probably by March 1, attorney Ron King of the city’s main pension fund said Monday.

Roughly 12,000 non-public safety retirees are also losing annual cost-of-living payments. Public meetings are planned for December to explain the changes. Retirees at risk of falling below the poverty line can apply for aid from a new fund. The only hit to 9,000 police and fire retirees is a reduction in the cost-of-living payment.

The cuts would have been worse if not for an $816 million bailout arranged by the state, foundations and the Detroit Institute of Arts, with help from Detroit’s chief federal judge, Gerald Rosen, and other mediators.

Q: Are there any notable threads still hanging?

A: Mayor Mike Duggan, who took office while Detroit was going through bankruptcy, has been irritated by some of the more than $100 million in legal fees and consultant contracts charged to the city. The judge ordered mediation for Dec. 3-4. Rhodes said bankruptcy law requires him to decide if fees are reasonable.

Pottow said the fees are “huge” but relatively small when compared to the size of Detroit’s multibillion-dollar case. Even if the judge disallowed 10 percent, he said, any leftover money wouldn’t affect deals that have been struck between the city and its many creditors.

“Trivial,” the professor said.

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Detroit’s bankruptcy is not just a local issue. Rhodes’ ruling could affect how cash-strapped cities, counties, townships and districts handle business.

A Detroit breakdown by the numbers:

18-20 – Projected city debt in billions at time of July 18, 2013 bankruptcy declaration.

477 – Number of days since Detroit declared bankruptcy and began plan of adjustment process in effort to get it approved in court.

7 – Number in billions Detroit hopes to shed in debt if bankruptcy plan is approved.

1.7 – Number in billions Detroit would likely get over 10 years if bankruptcy is approved to enhance city services.

15 – Number of months Detroit has dealt with the bankruptcy issue.

27 – Number of months it took Stockton, Calif. to exit bankruptcy. A judge approved the plan on Oct. 30.

180 – Number of days Detroit would have to finalize all settlements and agreements before the implementation a court-approved bankruptcy plan begin and the city “formally” exits bankruptcy.

700,000 – Estimated number of Detroit residents affected by city’s budget woes.

20 – Percentage in cuts the city and labor unions for city employees agreed to under a proposed bankruptcy plan after persistent protests. Future recoupment opportunities are part of agreement.

194.8 – Number in millions that’s part of a “grand bargain” deal Gov. Rick Snyder and the Michigan Legislature approved to help Detroit get out of bankruptcy and minimize pension cuts for retirees and future legal costs for the state.

100 – Number in millions Detroit Institute of Arts has agreed to raise as part of the “grand bargain” to avoid a potential bankruptcy fire sale of its art collection. The DIA is currently 87 percent toward its goal.

325 – Number in millions Detroit would borrow from Barclays Capital under city’s “plan of adjustment” if Rhodes approves the bankruptcy. The money would help settle some of the city’s debts and start funding post-bankruptcy reinvestment.

50,000 to 80,000 – Estimated number of abandoned residential and industrial structures within city’s 143 square miles that could be affected by bankruptcy case. A ruling in favor of bankruptcy could give city funds to tear more structures down.

9 – Number of days it took in court before Detroit became eligible to file for bankruptcy.

18.5 – Number in billions Detroit was eligible to declare bankruptcy for in court.

162 – Number in millions Detroit Emergency Manager Kevyn Orr said Detroit would lack in cash-flow by 2013 fiscal year’s end.

368 – Number in millions Orr said Detroit’s budget deficit would be by July 2013.

600 – Number of Chapter 9 bankruptcies in the U.S. of cities, towns, villages, counties and special purpose districts since 1937.

2011 – The year the second largest U.S. municipal bankruptcy occurred. Jefferson County, Ala. was $4.2 billion in the hole at time of filing.

150 – Number in millions Detroit has reportedly paid in lawyers, legal experts, fees and other related expenses during the bankruptcy process.

What do you think about Detroit’s bankruptcy case? Would you approve it if you were a judge? Feel free to share your thoughts in the comments section below.

The post Detroit bankruptcy: 20 reasons why you shoud care about today’s potential history-making ruling first appeared on Michigan Bankruptcy Facts 734-722-2999.

The post Detroit bankruptcy: 20 reasons why you shoud care about today’s potential history-making ruling appeared first on Michigan Bankruptcy Facts 734-722-2999.