City of Detroit Bankruptcy

At the time that the City of Detroit filed for bankruptcy in 2013, AFSCME had several unfair labor practices pending before the Michigan Employment Relations Commission. The “unfair labor practices” (ULPs) are claims which the AFSCME union filed on behalf of City employees that AFSCME represented. The ULP claims were filed against the City, claiming that the City violated state labor laws. Some of the ULP claims asked for money to be paid to AFSCME-represented employees, for various reasons. For a description of the ULP claims, see the attachment identifying the AFSCME Proof of Claim legal matters.

According to bankruptcy law, all pending actions against the City of Detroit had to halt. This is called a stay of proceedings. Due to the stay, the 11 pending MERC cases halted, and these cases had to be addressed through the bankruptcy court.

AFSCME submitted a “Proof of Claim” which is a document telling the Bankruptcy Court that the City owes AFSCME (and its members) money because the City violated the law in a number of ways. Throughout the bankruptcy proceedings, AFSCME’s Proof of Claim was assigned a value. Its claim was then put into a class of creditors that included other unsecured creditors who would share from one pot of B-Notes based on a pro rata share. The B-Notes is like an “I owe you” but is not real money. The “pro rata share” means every creditor gets a percentage of the entire pot of B-Notes, based on the value assigned to each proof of claim. For instance, if the total pot of B-Notes is $20 million, every creditor gets a percentage of the $20 million.

At this point, the AFSCME Bankruptcy Fund has received the B-Notes. The face value of the B-Notes that AFSCME received is $9,081,515. AFSCME has not received any interest payments but expects to receive the past interest payments within the next year or so. AFSCME is giving each of its members that could have benefited from the underlying MERC cases an equal share in whatever it receives as part of its claim.

No, the AFSCME Proof of Claim is related to the AFSCME unfair labor practice charges pending at the time that the City of Detroit filed for bankruptcy. Those that could have benefited from the unfair labor practice charges were active employees from 2009 to 2013. Those charges were not related to retirement benefits.

Due to the nature of AFSCME’s ULP charges, only those City of Detroit employees that were represented by AFSCME from 2009 to 2013 will benefit from the AFSCME charges. Therefore, those are the only individuals that will share in the AFSCME claim proceeds.

Each individual eligible AFSCME member must submit a Claim Form and W-9 Tax Form in order to receive a share of the proceeds from AFSCME’s bankruptcy claim. If you received a Claim Form and W-9 Tax Form in the mail, please complete those forms and submit them to the Claims Administrator by December 31, 2025. You may submit the completed forms by mail, by email, or by uploading the forms here.

Each individual eligible AFSCME member that submits a Claim Form and W-9 Tax Form will receive an equal share of the total amount of the proceeds from AFSCME’s bankruptcy claim. At this point, we do not know the total amount of the proceeds from AFSCME’s bankruptcy claim. We also do not know how many individuals will submit a Claim Form and W-9 Tax Form. The amount payable to each individual cannot be known until the end of the process.

AFSCME is paying the costs associated with bankruptcy and claims process. These costs will not be taken out of the proceeds from AFSCME’s bankruptcy claim. These costs include the attorney fees and the cost of the claims administration.

AFSCME has the right to recover the hundreds of thousands of dollars in legal fees that it paid in this ten-year-long bankruptcy process. Many entities filing a proof of claim do just that. However, AFSCME has elected to pay the members that money instead of reimbursing its expenses.

All of the claims in “Class 14”, which is the class or group of claims where AFSCME’s bankruptcy claim is placed, need to be assigned a value before proceeds for each claim can be determined. This is because each claimant’s “pro rata share”—or percentage—is based on the value placed on each claimant. Class 14 started with approximately 4000 individual claims. It has taken years for the court to assign a value to each of those claims. We are now waiting for the last couple of claims to be assigned a value. We hope that is completed in 2025. There may be only one claim waiting to be resolved, which is the case that Richard Wershe Jr. (aka “White Boy Rick”) brought against the City of Detroit and the federal government.

Similarly, we will not know that until several events occur. First, the Bankruptcy court will have to assign a value to all claims in Class 14. Once that is completed, AFSCME has created a fund that all of the proceeds will be transferred to until they are paid out. The AFSCME Bankruptcy Fund will receive some liquid assets, essentially cash. However, the vast majority of what the AFSCME Fund will receive are B-Notes, defined above. B-Notes are like “I owe you” bonds that the City of Detroit promises to pay over a 30-year period with interest. The AFSCME Bankruptcy Fund will have to sell the remaining B-Notes to get the cash, to distribute to the members. AFSCME has secured a broker to sell those B-Notes when it receives them. It does not know how long it will take to sell those B-Notes or how much they will sell for on the open market. The AFSCME Bankruptcy Fund has received $9,081,515. The Fund will sell those B-Notes for cash. The B-Notes will sell for some fraction of the face value.

Michigan law allows the Claims Administrator to pay the share of the proceeds to the deceased former member’s next of kin. The Claims Administrator is the person AFSCME hired to assist in processing the AFSCME Proof of Claim. In many cases, the next of kin will be a surviving spouse but it could be surviving children, grandchildren, etc. depending on the circumstances.

To file a claim on behalf of a deceased individual, there is a separate Claim Form that requires additional information to ensure that the proper individual or individuals is or are receiving the deceased members’ share of the proceeds. This separate form is available on the Important Documents page, titled “Deceased Former Employee Claim Form.” You must submit this Deceased Former Employee Claim Form, any supporting documentation, and a completed W-9 Tax Form by December 31, 2025. You may submit the completed forms and documents to the Claims Administrator by mail, by email, or by uploading the forms here.

If you are or were a City of Detroit employee that was represented by AFSCME from 2009 to 2013, you may be eligible to benefit from the AFSCME charges. There is a separate form on the Important Documents page, titled “Non-List Claim Form,” that you must fill out. You must submit this Non-List Claim Form, any supporting documentation, and a completed W-9 Tax Form by December 31, 2025. You may submit the completed forms and documents to the Claims Administrator by mail, by email, or by uploading the forms here.

We can only send the check to the last identified address. If you move, it is your responsibility to notify the Claims Administrator and update your address.

Ultimately, it will be up to you to determine whether the proceeds are taxable, and to assure that you satisfy all tax obligations that come with receiving the funds. It is anticipated that the funds will be taxable like wages, but neither AFSCME nor the Claims Administrator will give you tax advice. Therefore, the Internal Revenue Service requires that we make the appropriate tax withholding and deductions, like a paycheck. The payment will be reported to the IRS, and you will receive a W-2 for the payment of the proceeds. However, we recommend that you discuss the issue with your tax advisor to determine your personal local, state and federal tax implications.

The Claims Administrator is required to report the payment to the Internal Revenue Service. Like an employer that pays wages, you are identifiable to the IRS through your Social Security number. Therefore, your Social Security number is required in order to accurately and legally report the payment to the IRS, which is mandatory. If you do not provide your Social Security number, the payment cannot be processed legally. The Claims Administrator has implemented the highest standards of protection to ensure that your private information remains private. Such information will not be shared with anybody other than the IRS.

AFSCME has hired Epiq to perform the duties as the Claim Administrator for this matter. Epiq is a leader in claims administration. It has performed similar services for decades and has the experience to competently perform these functions.

If you still have questions after reviewing this website, you can contact the Claims Administrator by telephone at (888) 868-4941 or by email at info@CityofDetroitBankruptcyClaim.com. Please do not call the Court, the City of Detroit, or the attorneys of record.