The historic Detroit bankruptcy case moves into a crucial and contentious phase with the expected filing this week of the city's so-called plan of adjustment. That is the city's plan to settle with its creditors and emerge from America's largest-ever municipal bankruptcy.
The plan has implications not only for Detroit, which is struggling under some $18 billion in unfunded liabilities, but also for Wall Street, and the $4 trillion municipal bond market—which had been considered one of the safest investments around.
(Read more: Detroit turns bankruptcy into Wall St. vs. Main St.)
A draft of the plan, which Detroit Emergency Manager Kevyn Orr circulated among creditors last month, reportedly gives a slight preference to the city's pension funds—which have fought tooth and nail against the bankruptcy—over its bondholders. But neither side is likely to come away happy. The pension funds reportedly would receive 25 cents for every dollar they are underfunded, while bondholders would reportedly receive 22 cents on the dollar.