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Detroit's Chapter 9 bankruptcy will bring with it a unique set of restrictions and rules about what the city and the court can and cannot do.

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LANSING -- The city of Detroit filed for protection under Chapter 9 of the federal bankruptcy code late Thursday afternoon in what is believed to be the largest bankruptcy filing ever by a municipality.

But what is a Chapter 9 bankruptcy?

The basics

The federal bankruptcy code is divided into a number of chapters, each of which deal with a particular form of bankruptcy. Chapter 9 specifically deals with municipalities, including cities like Detroit.

Unlike the more common Chapter 7 or Chapter 13 personal bankruptcy, a Chapter 9 bankruptcy does not include possible liquidation of assets. Instead, Emergency Manager Kevyn Orr will be responsible for submitting a "debt adjustment plan" to deal with the outstanding claims against the city's coffers, which will require each group of creditors to sign off on the proposal.

Also unlike a personal (or business) bankruptcy, Detroit's petition for bankruptcy protection may not be heard in the federal district where it was filed. As a municipal bankruptcy, the filing can be assigned to any court within the Sixth Circuit, which covers Michigan, Ohio, Kentucky and Tennessee. The determination will be made by the chief judge of the Sixth Circuit Court of Appeals and will be based on which trial judge can most effectively take on the case.

Day-to-day operations

Immediately after the filing, Detroit was protected from claims by creditors under an "automatic stay," which is a provision of bankruptcy law that precludes collecting on outstanding debts.

Because the bankruptcy court does not have the authority under federal law to interfere in the day-to-day operations of the city, Detroit will still be able to provide police, fire and other public services. The city can also borrow money as necessary to continue operations, without court approval, and the court cannot exercise any authority over the political or governmental powers of the city.

Objections

Despite the automatic stay, creditors can still seek to prevent Detroit from moving forward with the bankruptcy by objecting to the petition. in order to file a petition, the city is required to have negotiated in good faith with creditors prior to filing, and failure to negotiate in good faith is considered grounds for a dismissal.

The process of objecting to the petition, and any possible resolution of those objections, could take weeks or months to resolve depending on the nature of the objections.

Brian Smith is the statewide education and courts reporter for MLive. Email him at bsmith11@mlive.com or follow him on Twitter or Facebook.