Bankruptcy and the U.S. Constitution: AG Holder to weigh in on claims

Bankruptcy and the U.S. Constitution: AG Holder to weigh in on claims

The judge overseeing Detroit’s bankruptcy case has invited U.S. Attorney General Eric Holder to file a brief in the case, involving two constitutional issues that will be discussed in bankruptcy court today.

Here’s why:

Among the city’s tens of thousands of creditors with financial claims are a handful of who say in their cases, bankruptcy law conflicts with the U.S. Constitution. Two of the men making such arguments were wrongfully convicted and imprisoned for decades: Walter Swift and Dwayne Provience. Prior to the bankruptcy, they sued the city for damages.

But their lawsuits were put on hold when the city filed for bankruptcy. In court filings, the two Detroit men and a few other creditors have argued that their claims involve constitutionally guaranteed rights and the U.S. Constitution trumps bankruptcy law.

No attorneys involved in the bankruptcy case have what’s called the “standing” to weigh in on such constitutional issues. So last week Judge Steven Rhodes asked Holder to file a brief. The judge wants Holder to weigh in on the question of the bankruptcy code’s constitutionality as related to these creditors’ claims.

Judge Rhodes requested Holder file it by Aug. 13, the day before the bankruptcy trial is scheduled to begin.

The U.S. Attorney’s office in Washington D.C. had no immediate comment on the request. But a spokesperson did say, prior to the Detroit bankruptcy, the last time the U.S. government briefed a constitutionality issue in a Chapter 9 case was in 1938. This is the second issue the U.S. Attorney General may weigh in on in Detroit. Last year, the office filed briefs arguing against the American Federation of State, County and Municipal Workers’ claim that the bankruptcy was unconstitutional.

Rhodes ruled in December the city was eligible for bankruptcy. Two weeks ago, the U.S. Sixth Circuit Court of Appeals in Cincinnati scheduled arguments for July 3 on an appeal of that ruling.

7.11.14 Request to USAG