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Tuesday, December 3, 2013

The Workers' Compensation Nuclear Option: Detroit officially enters bankruptcy

The "nuclear option" for a workers' compensation claim is a public entity bankruptcy and Detroit got the Court's approval to go forward with the legal maneuver. Over the course of the last 3 decades, bankruptcy has become a common practice to shield private corporations from product liability claims. Asbestos claims have seen dozen of companies use this legal tactic to reduce payment to less that 5% on the dollar. As corporations struggle for life in this changing economy, workers are now experiencing the effects of bankruptcy ruling to reduce their benefits and break the promise made in 1911 for an efficient and cost effective benefit program. Today’s post is shared from deseretnews.com

Detroit is finally officially bankrupt, a federal bankruptcy judge certified on Tuesday.

"It is indeed a momentous day," U.S. bankruptcy judge Steven Rhodes said at the end of a 90-minute summary of his ruling, USA Today reported. "We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity."

Rhodes surprised some observers by saying he would support the city in shaving pension expenses, a key bone of contention. The ruling on pensions has significant implications for others cities elsewhere. In California, for example, cities such as San Bernardino could seize the precedent, the Sacramento Bee suggested.

"But one...
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