A U.S. bankruptcy judge will have to determine whether or not Detroit is in fact eligible for Chapter 9 bankruptcy. Hearings started this Tuesday, the 15th. Lawyers who represent the city's unions, retirees, and creditors are battling with attorneys who represent the city. Those arguing on the behalf of creditors say that the Michigan constitution precludes the possibility of Detroit going bankrupt, as pension benefits are protected by the constitution.

They also say that going bankrupt would be unconstitutional because it interferes with the state's right to oversee its finances. This means that debt should not be reorganized or discharged through Chapter 9 bankruptcy, but that the state should be the one to reorganize the debt. On the other side, a lawyer for the U.S. Department of Justice argued that Detroit's bankruptcy was constitutional, that the state's rights are left intact in the process. It seems then that this could be a battle between federal bankruptcy law and state law. The initial plan was to hold a second hearing this past Wednesday, the 16th, but this additional hearing has been rescheduled for Monday, October 21.

Here are three of the issues that will be contended by both sides. The first of these is whether or not Detroit is insolvent. According to some of the city's creditors, Detroit has sufficient funds tied up in assets that could be sold, and in pension funds, for example. According to the Detroit Free Press, Detroit obviously insolvent, in every way, that the city is in an $18 billion hole that can never be paid off. Outside parties weighing in on the matter are conflicted about the city's pension funds, but bankruptcy experts have little doubt that Detroit will be deemed insolvent.

Second is the matter of whether or not Detroit acted in good faith with its creditors. According to the unions, they were denied the chance to negotiate as Detroit's finances continued to deteriorate. On the city's side, it is argued that all creditors had the same opportunities and information; negotiations were simply unfeasible in the current financial climate. Bankruptcy experts believe that the federal judge will agree with Detroit.

Thirdly, there is the matter of constitutionality. Is Chapter 9 bankruptcy constitutional for this city? Is the emergency manager law constitutional? Under federal law, cities can indeed file for bankruptcy. According to the state's emergency manager law, an emergency manager can be chosen to assist municipalities in dire financial straits. While residents of the state voted against the first emergency manager law that appeared in 2012, Governor Rick Snyder signed a slightly revised version into law, just weeks after the vote. Creditors assert that this law puts power into unelected hands, a kind of power that should not be designated apart from being voted into office. Detroit's lawyers will counter that federal law allows for the ability of cities to file for bankruptcy, thus the emergency manager law is constitutional. Which position will the federal bankruptcy judge take? The bankruptcy experts feel that the judge will agree with Detroit's argument. Of course, the actual results remain to be seen in the coming days and weeks.

Detroit filed for bankruptcy on July 18, the largest municipal bankruptcy in the country's history thus far. Of course, this could mean breaking new ground in the legal field, as the enormity of this undertaking will involve highly complex issues. But even an individual who needs bankruptcy protection can find the process to be an intense challenge. If you are considering this legal step, do not go without an experienced bankruptcy lawyer on your side. Together, you can forge a way to a healthier financial future.