From Wreckage Comes Reason: How Detroit’s Chapter 9 Filing Helps Develop a Practicable and Principled “Good Faith” Standard

The city of Detroit is beginning to rise from the ashes following decades of fiscal ineptitude, social failure, and corruption. Bolstered by protections under Chapter 9 of the Bankruptcy Code, Detroit has eliminated billions of dollars in debt and established a feasible plan for municipal reorganization. Now, Detroit is even considered an American comeback story. However, Detroits revitalization began on a tenuous foundation. The citys creditors objected vigorously to the bankruptcy petition by claiming that Detroit had not filed its bankruptcy petition in good faith under § 921(c). Despite the relatively scarce and imprecise case law and jurisprudence surrounding § 921(c), Judge Stephen Rhodes ruled that Detroit met the good faith requirement in addition to all of the requirements for Chapter 9 eligibility. In doing so, however, Judge Rhodes forged a new path in Chapter 9 analysis and established a practicable and principled good faith test. Now, Judge Rhodess approach to § 921(c) good faith can serve as a beacon of reason in an imprecise area of bankruptcy law