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Detroits proposal to exit its record municipal bankruptcy by paying retirees more than bond investors will cause serious mayhem, an attorney for the plans opponents told a judge.

An $800 million settlement underpinning Detroits plan to exit from its record municipal bankruptcy was brokered by biased mediators and should be thrown out, bond insurer Syncora Guarantee Inc. told a federal judge.

Syncora Guarantee Inc., the bond insurer fighting Detroits debt-cutting plans, said it may cancel insurance it wrote for interest-rate swaps that the city is seeking to terminate with an $85 million settlement.

Syncora Guarantee Inc. threatened to put another obstacle in the way of Detroits efforts to cut debt through bankruptcy by saying it may oppose the citys plan to pay $85 million to end interest-rate swaps.

Syncora Guarantee Inc. threatened to put another obstacle in the way of Detroits efforts to cut debt through bankruptcy by saying it may oppose the citys plan to pay $85 million to end interest-rate swaps.

A federal judge on Wednesday gave Detroit and a group of bond insurance companies two or three weeks to settle a dispute over whether the city can treat certain bonds as unsecured debt, warning of an "all or nothing" ruling if no deal is reached.

Detroit's path through bankruptcy began to take shape on Tuesday, with a second bond insurance firm ready to drop its objections to a controversial city financing plan, joining another bond insurer, bondholders and a committee of retired city workers in reaching agreements with the city.

Two insurance companies that guaranteed payments on Detroit's voter-approved general obligation bonds sued the city in U.S. Bankruptcy Court on Friday over its Oct. 1 default on $9.37 million in payments due to bondholders.