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Bankruptcy Judge Steve Rhodes on Friday approved a city plan to form a creditors’ committee of retired workers, but gave unions and pension funds that opposed the plan a measure of satisfaction by declaring that an independent trustee—and not the city—will select committee members, Reuters reported on Friday. Judge Rhodes also put off setting a date for a hearing on Detroit’s eligibility to file for bankruptcy, while Detroit lawyers disclosed an ambitious aim to present a plan for reorganization by the end of 2013. Detroit, whose course in bankruptcy court is being set by a state-appointed emergency manager, Kevyn Orr, set its target date at least three months earlier than the March 2014 deadline Judge Rhodes previously had proposed. Outside of court, Orr on Friday also proposed a new healthcare plan for city workers that would save Detroit $12 million annually by raising deductibles and trimming the number of available plans.

Just days after U.S. District Judge Rudolph T. Randa issued a key ruling in favor of the Archdiocese of Milwaukee in its bankruptcy, the church’s creditors are seeking an emergency order to determine whether Randa has a conflict of interest that should have been disclosed, the Milwaukee Journal Sentinel reported yesterday. Randa ruled last week that forcing the archdiocese to tap the $50 million-plus it holds in a trust for the perpetual care of cemeteries would substantially burden its free expression of religion under the First Amendment and a 1993 federal law aimed at protecting religious liberty. Lawyers representing the archdiocese’s creditors — primarily sex abuse victims — filed a motion on Friday asking U.S. Bankruptcy Judge Susan V. Kelley to compel the release of any records showing whether Randa and his wife, Melinda, have purchased any plots or crypts in one of the archdiocese’s cemeteries, or whether they have any interest as heirs or beneficiaries of several relatives known to be buried in them. Depending on what they find, the motion says, the lawyers say they may seek to vacate Randa’s order and ask him to recuse himself from the case.

Ahern Rentals Inc. and its bondholders have agreed to a path out of chapter 11 bankruptcy for the construction-equipment company, narrowly avoiding a showdown over rival restructuring plans, the Wall Street Journal reported today. In court papers filed on Friday, Ahern said that its success in lining up bankruptcy-exit financing has allowed it to improve payment terms for bondholders owed about $268 million, thereby winning their support for the plan. Under the amended plan, which a bankruptcy judge will consider at a June 5 hearing, the bondholders would receive immediate payment of $268 million in cash and the chance to receive another $25 million if the company changes hands within two years of exiting chapter 11. The bondholders would also receive another $10 million to cover the legal fees they racked up in Ahern's bankruptcy case, which has been pending since December 2011.

Ally Financial Inc., the auto lender majority-owned by the U.S. government, agreed to pay $2.1 billion to avoid lawsuits related to its bankrupt mortgage unit, Residential Capital LLC, Bloomberg News reported yesterday. Under the settlement, Ally will pay $1.95 billion in cash to the ResCap bankruptcy estate, plus $150 million in insurance proceeds, according to a court filing yesterday. The money will be added to the $4.5 billion that ResCap raised by selling its mortgage-servicing business and a loan portfolio and will eventually be distributed to creditors owed at least $6.3 billion under a reorganization plan supported by Detroit-based Ally.

Arcapita Bank said that an energy company's fraud claim stemming from Arcapita's sale of Texas natural-gas assets should be pushed behind the claims of other creditors, Dow Jones Daily Bankruptcy Review reported today. In a court filing last week, Arcapita took on Tide Natural Gas Storage LP's contention that Arcapita's bankruptcy plan shouldn't be approved by a judge because of $70 million it says it is owed.

The Commission will hold its fifth public hearing of 2013 at the National Association of Credit Management's 117th Credit Congress & Exposition today from 2-5 p.m. PT (5-8 p.m. ET) to hear witness testimony from top experts on trade creditor issues. Panels of experts will address issues related to preference claims, the role of committees in bankruptcies, §503(b)(9) and related issues. For more information on ABI’s Chapter 11 Commission and to view the prepared witness statements, please visit http://commission.abi.org.

AMR Corp. struck a deal with unsecured creditors owed more than $1.6 billion that it says will speed both its exit from bankruptcy and its merger with US Airways Group Inc., Dow Jones Daily Bankruptcy Review reported today. The American Airlines parent on Tuesday filed court papers seeking a judge's blessing for an agreement that lends the support of "a very significant portion" of the company's unsecured creditors to its debt-repayment plan.

Ally Financial Inc. says Residential Capital LLC's creditors "cannot come close" to proving that Ally is responsible for the liabilities in ResCap's bankruptcy case, the Wall Street Journal reported today. Ally said in a court filing that at the very least, the creditors' bid to sue it on behalf of ResCap is premature, and the contention that Ally "pierced the corporate veil" in its dealings with subsidiary ResCap will be a difficult case for creditors to win. Last month, ResCap's unsecured creditors' committee sought the right to sue Ally over its relationship with ResCap, saying that it thought Ally could be on the hook for all $20 billion to $25 billion in ResCap's liabilities. When the ResCap bankruptcy case began last spring, Ally had proposed to pay $750 million to ResCap's estate as long as it was released from liabilities. Creditors have consistently balked at that number, throwing the case into uncertainty.

Unsecured creditors have denounced Reader's Digest Association Inc.'s chapter 11 exit proposal, which offers them less than a tenth of a percent of what the publisher owes them, Dow Jones Daily Bankruptcy Review reported today. Lawyers for the official committee representing Reader's Digest trade suppliers and other unsecured creditors say they want more time to negotiate for an improved recovery in the bankruptcy case, which began in February.

Bahrain-based investment firm Arcapita Bank said that it has filed an amended reorganization plan in its U.S. bankruptcy case that has the support of its main creditors, Dow Jones Daily Bankruptcy Review reported today. Like Arcapita's original plan, which it filed in February, the amended plan envisions the company ceasing to make new investments and focusing on selling its existing portfolio of assets to settle creditor claims, according to court documents.