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Detroit Mayor Mike Duggan is concerned about the city’s bankruptcy fees. The city, which just finalized a bankruptcy exit plan, has racked up nearly $200 million in fees owed to the lawyers and consultants that guided it through the bankruptcy proceedings.

Bankruptcy Fees

The issue of bankruptcy fees came to light when an attorney for Detroit told U.S. Bankruptcy Judge Steven Rhodes that Detroit would like more time to review the fees that had been charged by Jones Day, the law firm representing the city, as well as other firms that provided advice to the city. But Rhodes responded, stating he had already approved the city’s play of adjustment and post-bankruptcy blueprint.

Fees to $200 Million

Mayor Duggan feels the fees could climb close to $200 million, which could jeopardize the city’s ability to meet its post-bankruptcy financial terms. Experts predicted the amount would be closer to $100 million when Detroit filed for municipal bankruptcy in July 2013. Rhodes had ordered confidential mediation regarding fees paid to the law firms contracted to represent Detroit. According to Bill Nowling, spokesman for Detroit’s emergency manager Kevyn Orr, fees charged to the city were $144.3 million as of Oct. 31. He also went on to say the fees are, “accounted for in the plan of adjustment,” Nowling said. “They’re entitled to their opinion on this. The trial is over, so the only fees that are left are the fees incurred in November, and any fees incurred in implementing the plan. I just think it’s without merit to suggest the fees are going to reach $200 million.”

Bankruptcy Fees are Sensitive Subject

The issue of fees is not a new one in this historic case. Critics initially questioned how the bankrupt city would be able to handle the legal fees. Some attorneys and consultants agreed to work for discounted rates as they shepherded the city through the 16-month bankruptcy trial. A complete tally of the fees is not completed.

Sources: Detroit Free Press, Could bankruptcy fees jeopardize Detroit’s exit plan? November 12, 2014

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