Detroit Becomes Largest US City to File for Bankruptcy
Detroit filed for Chapter 9 bankruptcy on Thursday, becoming the biggest U.S. city in history to do so.
Gov. Rick Snyder authorized the city’s emergency manager to file for federal bankruptcy, saying it was the only option to restore the city and provide residents with necessary public services.
“The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future,” the governor said in a statement. “This is a difficult step, but the only viable option to address a problem that has been six decades in the making.”
Kevin Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing in federal bankruptcy court.
Orr was unable to convince a host of creditors, the city’s union and pension boards to take pennies on the dollar to help facilitate the city’s massive financial restructuring.
He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of a bankruptcy filing.
A number of factors — most notably steep population and tax base falls — have been blamed on Detroit’s tumble toward insolvency.
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