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Ethics and Retirement Obligations in Bankrupt Detroit

When a business goes bankrupt, even its retired employees, who had no role in that bankruptcy, will pay a price in reduced or eliminated retirement payments. That's because they are "unsecured creditors" — people owed money for services under a contract with their former employer, but who have no right to the assets of the company. In a bankruptcy all creditors have to carve up and share in the cash value of the sellable parts of the business. The same is true for a city. In the face of Detroit's bankruptcy, former employees are discovering the consequences of tolerating or ignoring decades of fiscal mismanagement by elected leaders. While the average pension is just $19,000 per year, and city workers mistakenly thought their pensions were guaranteed through the state constitution, the reality is that bankruptcy law trumps everything, and all unsecured creditors share in the inevitable "haircut."

The Rev. Charles Williams II of the historic King Solomon Baptist Church argues that the politicians don't care and companies won't help, so it is up to the people to take care of one another and to organize to create a better future for Detroit and themselves. In a 9-minute video news report prepared for Religion & Ethics Newsweekly, a source for cutting edge reporting at the intersection of faith and culture, correspondent Lucky Severson explores the economic, legal, and ethical issues of pension obligations in a city going bankrupt, noting that Detroit is just the first of many cities in the United States that will have to come to terms with having made bigger commitments to employees than can be honored during a prolonged national economic downturn. For resources to help teach religion and ethics, see our feature article, "Best Resources on Religious Education."

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