Detroit files largest municipal bankruptcy in U.S. history

A view of downtown Detroit is seen looking north along Woodward Avenue in Detroit, Michigan. Credit: Reuters
A view of downtown Detroit is seen looking north along Woodward Avenue in Detroit, Michigan.
Credit: Reuters

The city of Detroit filed for bankruptcy on Thursday, making it the largest-ever municipal bankruptcy in U.S. history and marking a new low for a city that was the cradle of the U.S. automotive industry.

In a letter accompanying the filing, Michigan’s Governor Rick Snyder said he had approved a request from Detroit Emergency Manager Kevyn Orr to file for Chapter 9 bankruptcy protection saying “it is clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available.”

Snyder, a Republican, appointed Orr in March to tackle the city’s spiraling long-term debt, which is estimated at $18.5 billion.

The former manufacturing powerhouse has seen its population fall to 700,000 from a peak of 1.8 million people in 1950. The city’s government has been beset by corruption cases over the years. Waning investment in street lights and emergency services has left the city struggling to police the streets.

In June, Orr presented a proposal to creditors offering them pennies on the dollar. His plan had met with resistance from some creditors, most notably Detroit’s two pension funds, which had recently filed lawsuits in a state court challenging Snyder’s ability to authorize Orr to file for bankruptcy.


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