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Judge to rule on Detroit bankruptcy next week

The judge overseeing Detroit's historic bankruptcy petition set Dec. 3 as the date for issuing his decision on whether the cash-strapped city qualifies as bankrupt under federal bankruptcy law, according to a court filing posted Monday.

U.S. Judge Steven Rhodes will hand down his ruling in federal bankruptcy court in Detroit at 9 a.m. that day. A written decision will be available shortly afterward, the court filing said.

No matter how Rhodes rules, it is expected that his decision will be appealed.

With $18.5 billion in debt and liabilities, Detroit is the largest U.S. city to file for bankruptcy. 

Rhodes' ruling will cap months of anticipation, since Detroit filed its bankruptcy petition July 18. During a nine-day trial that wrapped up Nov. 8, Detroit sought to prove that it is bankrupt.

Under Chapter 9 of the federal bankruptcy code, it is Detroit's burden to prove it is insolvent and that it negotiated in good faith with creditors or that negotiations were impractical.

The city's unions, public-sector retirees and two pension funds have objected to Detroit's bankruptcy filing, arguing that Kevyn Orr, Detroit's state-appointed emergency manager, purposely drove the city into bankruptcy court and did not negotiate toward an out-of-court settlement.

The trial included a rare appearance from a sitting governor on the witness stand as Michigan Governor Rick Snyder, who approved the city's filing, testified. Orr also testified along with a long line of other government officials, consultants and union leaders.

City lawyers who testified during the eligibility trial argued that Detroit acted in good faith prior to the bankruptcy filing, but that negotiations were impractical because of the large number of creditors and an unwillingness on the part of union, retiree and pension fund negotiators to make concessions.