Bankrupt Cities, Municipalities List and Map Bankrupt Cities, Municipalities List and Map Many local governments across the U.S. face steep budget deficits as they struggle to pay off debts accumulated over a number of years. As a last resort, a select few filed for bankruptcy. Governing is tracking the issue, and will update this page as more municipalities seek bankruptcy protection. A federal judge recently approved Detroit's plan to pay off about $7 billion in debt. Detroit previously became the largest U.S. city ever to file for bankruptcy in 2013. Overall bankrupt municipalities remain extremely rare. A Governing analysis estimated only one of every 1,668 eligible general-purpose local governments (0.06 percent) filed for bankruptcy protection from 2008 through 2012. Excluding filings later dismissed, only one of every 2,710 eligible localities (not all states permit governments to file for bankruptcy) filed since 2008. The majority of filings have not been submitted by bankrupt cities, but rather lesser-known utility authorities and other narrowly-defined special districts throughout the country.

In Omaha, Neb., more than a dozen sanitary districts have filed for bankruptcy, accounting for nearly a quarter of all Chapter 9 filings since 2010. It's also important to note that only about half of states outline laws authorizing municipal bankruptcy. View our bankruptcy laws map for each state's policies. List of Bankruptcy Filings Since January 1, 2010 All Municipal Bankruptcy Filings: 51 General-Purpose Local Government Bankruptcy Filings (9): -- City of Hillview, Ky. -- City of San Bernardino, Calif. -- Town of Mammoth Lakes, Calf. (Dismissed) -- City of Stockton, Calif. -- City of Harrisburg, Pa. (Dismissed) -- City of Central Falls, R.I. -- Boise County, Idaho (Dismissed) LAST UPDATED: Aug. 21, 2015 Municipal Bankruptcies Map The map below shows all municipalities filing for Chapter 9 bankruptcy protection since 2010, along with local governments voting to approve a bankruptcy filing. Cities, towns and counties are shown in red. Utility authorities and other municipalities are displayed in gray. Click a marker to view details of each filing.

Multiple municipalities have filed for bankruptcy in some cities, such as Omaha, Neb., so not all markers are visible without zooming in on the map. Please note that some listed municipal bankruptcy filings have been dismissed, as indicated. Detroit Bankruptcy States without laws authorizing municipal bankruptcies often allow for different measures providing financial relief. In Michigan, seven cities and school districts have emergency managers, and another three are under consent agreements. View our map and story about the state's efforts to turn around the distressed municipalities. Other Detroit Coverage: Detroit becomes largest US city to file for bankruptcy - NBC News Jul 18 2013, 6:05 pm ET Detroit becomes largest US city to file for bankruptcy by CNBC and wires advertisement In this July 12, 2013, an Outsource to Detroit banner from Galaxe.Solutions is seen on a Detroit building. Carlos Osorio Detroit, saddled with more than $18 billion in debt, became the biggest U.S. city in history to file for bankruptcy on Thursday. Once a symbol of America's industrial might and more recently an example of urban decay, crime and hopelessness, the home to the nation's automobile industry took the extraordinary step after months of negotiations with creditors failed.

“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,” Gov. Rick Snyder 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.” Snyder authorized the city's emergency manager to file for federal bankruptcy, as required by state law, saying it was the only option to restore the city and provide residents with necessary public services. 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 -- including pensions, Teamsters, employee associations and banks -- 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.

Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is now struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them. In a letter that accompanied the federal filing, Snyder listed the city's ailments: The city's unemployment rate has tripled since 2000; its homicide rate is at its highest in nearly 40 years; residents wait an average of 58 minutes for the police to respond to their calls (the national average is 11 minutes). The governor's statement on Thursday said that 38 cents of every city dollar goes toward debt repayment, legacy costs and other obligations. That was expected to reach 65 cents per dollar by 2017. When Orr initially made his pitch to creditors, some were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than the 10 cents on the dollar under that plan.

A team of financial experts put together by Orr said that proposal was Detroit's one shot to permanently fix its fiscal problems. On Wednesday, as the bankruptcy filing was imminent, Detroit's two pension funds filed a lawsuit against the governor and Orr, the Free Press, Detroit's hometown paper, reported . Detroit city employees filed suits earlier this month as well -- for fear their pensions would be slashed if the city filed for bankruptcy. Earlier Thursday, the Free Press said the filing would set off a 30- to 90-day period "that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer." If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment. In the letter to the court, Snyder wrote: "I know many will see this as a low point in the City's history. If so, I think it will also be the foundation of the City's future -- a statement I cannot make in confidence absent giving the City a chance for a fresh start, without burdens of debt it cannot hope to fully pay." The Associated Press and Reuters contributed reporting. CNBC and wires Detroit becomes largest U.S.

city to enter bankruptcy FacebookEmail Twitter Google+ LinkedIn Pinterest Detroit becomes largest U.S. city to enter bankruptcy DETROIT — U.S. Bankruptcy Judge Steven Rhodes is set to rule Tuesday on whether the city of Detroit is eligible for bankruptcy. Post to Facebook Detroit becomes largest U.S. city to enter bankruptcy DETROIT — U.S. Bankruptcy Judge Steven Rhodes is set to rule Tuesday on whether the city of Detroit is eligible for bankruptcy. Check out this story on USATODAY.com: CancelSend A link has been sent to your friend's email address. Posted! A link has been posted to your Facebook feed. 160 To find out more about Facebook commenting please read the Conversation Guidelines and FAQs Detroit becomes largest U.S. city to enter bankruptcy Nathan Bomey, Brent Snavely and Alisa Priddle, Detroit Free Press Published 9:58 a.m. ET Dec. 3, 2013 | Updated 7:53 p.m. ET Dec. 3, 2013 CLOSE x Share Detroit Mayor Dave Bing says there is "going to be a lot of pain" for people following a judge's ruling that the city is eligible to fix its finances in bankruptcy court. (Dec.

3) AP Detroit filed for Chapter 9 bankruptcy protection July 18. The city of Detroit from midtown. (Photo: Carlos Osorio, AP) Pension reductions could be part of mix City could sell assets, including Detroit Institute of Arts property Judge would like to see a draft plan by the end of the year 4563 CONNECT TWEET LINKEDIN 160 COMMENTEMAILMORE DETROIT — The city of Detroit officially became the largest municipality in U.S. history Tuesday to enter Chapter 9 bankruptcy after a judge declared it met the specific legal criteria required to receive protection from its creditors. The landmark ruling ends more than four months of uncertainty over the fate of the case and sets the stage for a fierce clash over how to slash an estimated $18 billion in debt and long-term liabilities that have hampered Detroit from attacking pervasive blight and violent crime. STORY: How Detroit went broke "It is indeed a momentous day," U.S. Bankruptcy Judge Steven Rhodes said at the end of a 90-minute summary of his ruling. "We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start.

I hope that everybody associated with the city will recognize that opportunity." In a surprise decision Tuesday morning, Rhodes also said he will allow pension cuts in Detroit's bankruptcy. He emphasized that he won't necessarily agree to pension cuts in the city's final reorganization plan unless the entire plan is fair and equitable. "Resolving this issue now will likely expedite the resolution of this bankruptcy case," he said. Rhodes' verbal ruling, which precedes a 140-page written opinion to be issued Wednesday, gave Detroit the green light to enter Chapter 9 bankruptcy. "The court finds that Detroit was and is insolvent," he said. "The court finds that the city was generally not paying its debts as they became due." Rhodes said bankruptcy was a "foregone conclusion for a very long time. Cities often wait longer to file for bankruptcy than they should have, and the city of Detroit was no exception." Rhodes said he will not issue a stay on the bankruptcy, meaning the case will proceed. “The court finds that Detroit was and is insolvent. The court finds that the city was generally not paying its debts as they became due.” Judge Steven Rhodes, U.S.

Bankruptcy Court Even though Michigan Council 25 of the American Federation of State, County and Municipal Employees already has filed an appeal — and more will come in days ahead — the bankruptcy code provides for Chapter 9 to continue while appeals are pending that challenge, said Clark Hill lawyer Robert Gordon, who represents the city's pension funds and will be filing an appeal. John Pottow, a University of Michigan bankruptcy law professor, said Rhodes clearly was urging the city to reach a consensual resolution with its creditors. "Bottom line: He's pushing negotiation," Pottow said in e-mail. Rhodes scolded the city for rushing through negotiations with creditors before its filing, noting they only had 30 days to offer a counter. Saying that amount of time is "simply far too short," Rhodes ruled the city did not satisfy good faith requirements to try to negotiate with creditors outside of bankruptcy court. Lawyers for unions and retirees who fought to persuade the judge to reject Detroit's eligibility for bankruptcy found a silver lining in Rhodes' criticism of the city's negotiation efforts. "The city has to step up now and negotiate more reasonable and more fairly," said Lynn Brimer, a lawyer for the Detroit Retired Police Members Association.

Despite criticism of Detroit's negotiations, Rhodes said negotiating in good faith was impractical for the city because its financial crisis was growing worse, and creditors filed several lawsuits that could have derailed a bankruptcy filing. (Photo: Spencer Platt, Getty Images) The city now will proceed with its plan to introduce a proposal to restructure its debt and reshape government operations. Rhodes asked lawyers for Jones Day, the law firm that represents the city in bankruptcy court, if a first draft of the so-called "plan of adjustment" could be filed by the end of the year. Lawyer David Heiman responded, "We're not quite certain," adding it would be far in advance of the judge's March deadline. Detroit Emergency Manager Kevyn Orr said his team plans to submit the plan of adjustment "in the coming weeks," file a disclosure statement early next year and work to exit Chapter 9 protection by the end of September. "Time is of the essence, and we will continue to move forward as quickly and efficiently as possible," Orr said in a statement.

"We hope all parties will work together to help us develop a realistic restructuring plan that improves the financial condition of Detroit and the lives of its 700,000 citizens." The plan is expected to include controversial cuts to unsecured creditors and asset sales, including a potential spinoff of the water and sewer department and the possible sale of Detroit Institute of Arts property. Rhodes said one-time infusions of cash will not provide for a sustainable financial future, but he did not rule out the possibility of approving asset sales. In a press conference after the ruling, Orr message's to pensioners was this: "We're trying to be very thoughtful, measured and humane," but cuts are necessary. “You can treat creditors differently.” Lawyer Sharon Levine, American Federation of State, County and Municipal Employees Gordon, the lead lawyer for the city's two pension funds, said he believes the judge cares about residents and the plight of pensioners. "I hope it plays out when a plan is proposed," he said of expected pension cuts. While the judge cautioned the city he would scrutinize proposed cuts in the restoration plan, Gordon did not interpret it as a warning to the city to protect the money.

Other lawyers representing retirees expressed disappointment that individuals were being lumped with bondholders and financial institutions. Major creditors objecting to the bankruptcy included AFSCME; the United Auto Workers; Detroit's two pension funds; the city's public safety unions, retiree associations and a committee created to officially represent retirees during the bankruptcy. AFSCME lawyer Sharon Levine said bankruptcy is a powerful and flexible tool. "You can treat creditors differently," she said. The ruling comes after an exhaustive nine-day bankruptcy eligibility trial that concluded Nov. 8. During that trial, Rhodes gave unions and retiree groups an opportunity make their argument that the city's bankruptcy case should be rejected. (Photo: Carlos Osorio, AP) Unions and retirees argued that Orr conducted no substantive negotiations with creditors and argued the city fell short of its duty to conduct "good faith" negotiations before filing for bankruptcy. No financial creditors objected to the filing. By July 18, the day Detroit filed for bankruptcy, the city was being bombarded by lawsuits, facing dwindling cash flow and failing to deliver vital services — adding credence to Jones Day bankruptcy lawyer Bruce Bennett's argument that reaching a deal with more than 100,000 creditors would have taken too long.

"It was clear to Judge Rhodes that negotiations were not going to go anywhere," Laura Beth Bartell, a Wayne State University law professor, said in a recent interview. Rhodes ruled the city is legally insolvent and obtained the necessary legal authorization from Michigan Gov. Rick Snyder to enter Chapter 9. Brimer, who represents Detroit's retired police officers, said the fight isn't over. "Perhaps it's fair to say the fight has just begun," she said. Mayor Dave Bing sounded an optimistic note after the ruling, saying it will be beneficial in the long run. "There's going to be a lot of pain for a lot of different people," he said. "But in the long run, the future will be bright." Contributing: Joe Guillen, Detroit Free Press 4 main rulings on eligibility Here's how U.S. Bankruptcy Judge Steven Rhodes ruled Tuesday on each criteria of the eligibility question as required under Chapter 9 of U.S. bankruptcy code. Criteria Ruling Did the city obtain the state's approval to file for bankruptcy? Rhodes ruled that Michigan Gov. Rick Snyder legally gave the city the OK to file for bankruptcy in July. Is the city insolvent?

"The court finds that the city was generally not paying its debts as they became due. ... The court finds that the city of Detroit was and is insolvent." Did the city negotiate in good faith? Allowing only a month to negotiate was not enough, Rhodes said. "This calendar was very tight and did not request counter proposals," he said. "The creditors cannot be faulted for failing to offer counter proposals when they did not have enough information to evaluate the city's initial vague proposal." He ruled that the city did not negotiate in good faith but filed the petition for bankruptcy in good faith. Was it impractical to negotiate in good faith? Rhodes found that negotiating in good faith was impractical. And "accordingly, the court finds that pre-filing negotiations were impracticable." Live coverage from the federal courthouse in Detroit See the details as they happened in this Twitter blog by Free Press reporters Nathan Bomey and Brent Snavely.

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Detroit becomes largest US city to file for bankruptcy in historic 'low point' | US news | The Guardian Detroit Detroit becomes largest US city to file for bankruptcy in historic 'low point' Michigan governor laments lowest point in city's history after emergency manager fails to broker deal between city's bondholders and pension funds Thursday 18 July 2013 17.04 EDT First published on Thursday 18 July 2013 17.04 EDT Share on Messenger Close Sinking under huge debts and decades of mismanagement, Detroit formally filed for bankruptcy on Thursday, becoming the biggest US city ever to take such a drastic measure. Kevyn Orr, Detroit's emergency manager, took the decision after failing to broker a deal between the city's bondholders and its pension funds. The filing sets a new record for municipal bankruptcies and dwarfs the previous record filings by Jefferson County, Alabama, and Stockton, California. No other city of Detroit's size has ever gone bust. Orr and the city's creditors and pensioners will now begin a fraught legal consultation period while a court determines whether the city is eligible for "chapter 9" bankruptcy protection for its $18.5bn debts and liabilities.

In a letter posted with the filing, the Michigan governor Richard Snyder confirmed he had received Orr's request to start the bankruptcy proceedings. He said it was "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 said he hoped the bankruptcy would be the beginning of the end of Detroit's woes. "This decision comes in the wake of 60 years of decline in the city, a period in which reality was often ignored. I know that many will see this as a low point in the city's history. If so, I think it will also be the foundation of the city's future," he wrote. The governor painted a picture of a city in collapse. Citizens wait 58 minutes for the police to respond to calls, compared to a national average of 11 minutes. Only a third of ambulances were in service in the first quarter of 2013. There are approximately 78,000 abandoned buildings in the city. The unemployment rate had nearly tripled since 2000 and the homicide rate was at its highest level in 40 years, he said.

Detroit is unable to meet its most basic obligations to its residents, let alone its creditors. "The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote. Orr had set out a restructuring plan in June for the city, which has been plagued by corruption and plummeting revenues for years. But pension groups and bondholders balked at the terms. This week, pension funds objecting to Orr's plan sued to stop him from making the move. At a press conference in Detroit on Thursday evening, Orr said the city's debts were currently claiming 38 cents on every $1 it receives in revenue. That figure would rise to 65 cents by 2017. "This is the right thing to do," he said of the bankruptcy filing. The White House said it was monitoring the situation but stopped short of offering any federal aid.

Spokeswoman Amy Brundage said: "While leaders on the ground in Michigan and the city's creditors understand that they must find a solution to Detroit's serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America's great cities." Matt Fabian, the managing director of bond expert Municipal Market Advisors, said the filing had been widely anticipated. "Detroit's story has been terrible for 50 years. This is just the latest terrible thing to happen." He said bankruptcy would allow Orr to renegotiate government contracts and other broad powers to impose draconian costs cuts. But he warned bankruptcy was not an easy path. "This will make it hard for the city to conduct day-to-day business. It will drain a lot of time, it could put people off moving businesses to Detroit and it could last for years," he said. Other major cities have teetered on the edge of bankruptcy, including New York in 1975, Cleveland in 1978 and Philadelphia in 1991. But all brokered deals rather than face the dire consequences of going bust.

"Detroit has severe difficulties, but this would be an extraordinary event," said James Spiotto, a chapter 9 expert and head of the bankruptcy unit at Chicago's Chapman & Cutler, before the bankruptcy was confirmed. If the filing is approved, Detroit's cost of borrowing will soar and the city will struggle to raise cash, Spiotto warned. Meanwhile, officials would spend years battling in the court over who is owed what. "Chapter 9 is time-consuming, expensive and uncertain," Spiotto said. Orr has said bankruptcy was not his preferred option. But as talks foundered, his options narrowed. His original plan was to slash benefits to retirees, including pensions and healthcare, and cut already minimal services to the bone. Police and firefighters who retire before age 55, for example, would get no healthcare under one proposal. Bondholders would have received cents for every dollar in debt they hold. Municipal bonds have traditionally been viewed as among the safest available investments. When Central Falls in Rhode Island went bust in 2011, the state passed a law giving bondholders priority over other creditors, including retirees. Detroit's investors must now be wondering whether bankruptcy would give them a better deal.

Neither side was willing to sign up for Orr's settlement. This week, the city's two pension boards – the General Retirement System and the Police and Fire Retirement System – sued Orr and Michigan governor Rick Snyder in an attempt to block a bankruptcy. "It appears imminent the governor will grant the emergency manager the unconditional power to proceed under chapter 9, and the emergency manager will seek to have the city's pension debts impaired unless the retirement systems and their participants accept the emergency manager's unilateral imposition of significant impairments to their accrued financial benefits," the lawsuit says. Orr was appointed in March after Snyder declared a "financial emergency" in Detroit. A lawyer and University of Michigan alumnus, Orr helped steer Chrysler out of bankruptcy, but this is a dilemma of an altogether greater magnitude. Even after years of decline, Detroit remains the US's 18th most populous city. The city's finances may have hit an all-time low but its business is bouncing back. The car firms that made the city are back in rude health, and downtown Detroit is being revitalized by new businesses. Some local business leaders believe that the city has already hit rock bottom, and that a stronger Detroit is already emerging.

Dan Gilbert, founder of the Quicken Loans lender, has rebuilt downtown and encouraged new businesses and old to move into the city. In a recent interview with the Guardian he said he is "finally going to do what needed to be done if not in the last several years then in the past decades. It's essentially good news for the city because it means this period is coming to an end." But for Detroit's poor, bankruptcy is likely to make life even harder in the short term. About 60% of Detroit's children live in poverty. Orr had planned to bus creditors to some of the city's poorest areas so they could see what was at stake. Armed security would have gone along for the ride. "If they can see what it's like for Detroiters, what they endure every day in this city, I think they'll begin to understand what's at stake," Orr told the Detroit Free Press. The tour was canceled as bankers became worried about the PR impact of captains of finance touring the city's poorest neighbourhoods.

Topics Governor and Detroit emergency manager make case for taking cash-strapped city into bankruptcy – but hard choices await Published: 19 Jul 2013 From the US city of Cleveland, Ohio to the Canadian province of Newfoundland, plenty of areas have gone bust before Published: 19 Jul 2013 Talks stall between Kevyn Orr and city's pension funds with Detroit days away from becoming biggest municipal bankruptcy ever Published: 18 Jul 2013 Michigan Governor Rick Snyder announces the city of Detroit has filed for bankruptcy on Thursday Published: 19 Jul 2013 What does it mean when a city files for bankruptcy like Detroit? - Quora Quora What does it mean when a city files for bankruptcy like Detroit? Seven cities and towns in the US have filed for bankruptcy since Jan 2010. These are 1) Detroit 3) Mammoth Lake , California (dismissed) 4) Stockton, California 6) Central Falls, Rhode Island 7) Boise, Idaho Does this only happen in the US? And what is going to happen next? How will the city operate?

Marc Bodnick , Harvard Gov major, Stanford PoliSci PhD student and John Burgess , Representing the USA for over 40 years, officially and non-officially Disclosure: While I've studied bankruptcies as they relate to the financial markets and investments, I'm by no means an expert on this topic. The points below are based largely on a collection of news articles and financial reports I've read. First, Detroit filed for a Chapter 9, so not the typical Chapter 11 or Chapter 7 you generally hear of in the media. Let's examine the implications one-by-one: Implications for creditors Creditors should by far end up being the biggest losers. Detroit has over 100,000 creditors consisting of banks, insurance companies, pension funds, wealthy individuals, retirees, etc. The bond insurers will also feel the brunt of the bankruptcy. Based on the latest information available, secured creditors like UBS and BoA are expected to receive 75 cents on the dollar on roughly $340m of secured debt via swaps. Unsecured creditors will be entitled to pennies on the dollar - Detroit's emergency manager has asked that creditors take about 10 cents on the dollar of what they're owed.

There's at least $11.5bn in unsecured debt out of the $18.5bn. Incidentally, Chapter 9 protects the city from lawsuits by creditors. Now, that is not to say all hopes are lost for the creditors. Recall that New York declared a moratorium on its debt in the 1970s, but creditors were ultimately paid in full under a restructuring agreement. Personally, I think there's virtually no chance that the unsecured creditors will sign off on the restructuring proposals being put forth by Detroit. The creditors will most certainly opt to spin the roulette in the court. Implications for other municipalities It is possible that a bankruptcy of this magnitude will drive up the borrowing costs for nearby cities and, in general, cities with questionable finances across the country. This municipal default would be, after all, the largest of its kind in history - it makes #2 Jefferson County's $4.2bn flop look like child play. If the bankruptcy court sets a precedent that allows for the restructuring of retirement benefits, the implications could be far-reaching. Doing so will greatly reduce the credit risk (and by extension, borrowing costs) for municipal bonds.

Implications for day-to-day operations Vital services such as police and fire protection will be maintained at current levels, but the city is still evaluating cuts to other services. Since the debt has already been issued and hence cash raised, Detroit is more or less free to spend what's presently in its offers, in particular thanks to a Chapter 9 provision (the "automatic stay") that makes it impossible for creditors to collect on outstanding debts. Similarly, the bankruptcy court is, under federal law, prohibited from interfering in the day-to-day operations of the city. The primary reason Detroit will likely curtail spending is to signal to the financial markets that it is getting its act together. Otherwise, future borrowings may be excruciatingly costly. Implications for entitlements Chapter 9 grants the city authority to reject and redraft deals with unions. The city has a minimum of $9.2bn in unfunded pension and retirees health care liabilities. Although the state constitution explicitly shields public pensions from cuts, federal bankruptcy law provides some leniency in reducing or voiding contractual obligations. Detroit has expressed interest in reducing pension benefits for current employees and terminating city-funded healthcare plans. Pensions for some retirees may or may not be altered.

In all, 30,000 or so will be directly affected. Other implications Under the federal bankruptcy code, neither a judge nor creditors has the power to force the municipality to repay debt via a liquidation of assets. It's entirely possible that Detroit might elect to sell its zoo or Fort Wayne. Next steps Expect a flurry of court hearings and legal battles to ensue. It's not even entirely clear whether Detroit has the power to petition for bankruptcy, which is basically what it has done. Expect the theatrics to play out over the course of the next 12 months. Written Jul 19, 2013 · Upvoted by Marc Bodnick , Harvard Gov major, Stanford PoliSci PhD student Creditors lose money. Some of the creditors are retired city workers - teachers, firemen, police. They will probably have to negotiate reduced pension and medical benefits between now and the city's exit from bankruptcy. Some of the creditors are people who've done work for the city - like fixing potholes - and they'll probably have to accept reduced payments. Some employees get their pay cut. The biggest groups of employees - teachers, firemen, police - are the ones whose pay sums to the biggest numbers.

They probably get hurt more than than the school superintendents and city executives with bigger salaries. Maybe there will be job cuts. The city still needs teachers, firemen, and police. But there are many fewer residents now, so maybe the city can get by with fewer employees. In the end, the city's budget has to balance. The city can't come out of bankruptcy promising to pay more every year than they take in. Life after bankruptcy depends on how well all these negotiations are done. Can the city keep their best employees and their best suppliers? Can they convince them that they won't get similarly screwed in the future? Or will the best find a way to leave? The courts appoint specialists in this sort of cleanup and take power away from politicians who created the mess. So there's hope. 862 Views · View Upvotes · Answer requested by Written Jul 19, 2013 · Upvoted by Marc Bodnick , Harvard Gov major, Stanford PoliSci PhD student The city is forced to live within its means because it can no longer borrow. City services are cut to the bone, including police, fire, libraries, and parks. Property crime such as burglary goes up. New businesses cease opening in the city.

Suburban property values go down because no one wants to move there. Unemployment goes up. Perhaps most importantly, residents lose pride and become pessimistic. Bottom feeders who exploit cheap labor move in. For instance, companies who operate minimum wage call centers and manufacturing. 498 Views · View Upvotes · Answer requested by Quora User Written Jul 21, 2013 Bankruptcy these days is no more than the 'popping' of a paradigm. The belief that currency equates to wealth. The belief that economics will empower us to create 'wealth' by printing tokens - and tying us to constant 'growth' of an economy because we need expansion to furnish interest payments. Alas the 'B' word simply denotes a 'wakeup' to reality - and hey why worry - the next pusher will come along with computer zero's and squeeze whatever 'real' wealth is left. As long as you work harder for less to furnish 'impossible' and 'unjustifiable' interest payments you are just fine! If not you, then your children - after all we have raided the future to 'pay' for the present, so if you aren't up to the job, your children will be! They'll have no choice...

Detroit just filed for bankruptcy. Here’s how it got there. - The Washington Post Detroit just filed for bankruptcy. Here’s how it got there. The inside track on Washington politics. Be the first to know about new stories from PowerPost. Sign up to follow, and we’ll e-mail you free updates as they’re published. You’ll receive free e-mail news updates each time a new story is published. You’re all set! Got it By Brad Plumer By Brad Plumer July 18, 2013 Follow @bradplumer On Thursday, the city of Detroit filed for bankruptcy — the largest city in the United States ever to do so. (Carlos Osorio/AP) To get a better sense of just how Detroit got into such dire financial straits, it's worth browsing through this May report on the city's finances and this "Proposal for Creditors" from June. Detroit's emergency manager Kevyn Orr laid out all the problems and economic headwinds facing the city. For instance: — Since 2000, Detroit's population has declined 26 percent.

There are now just 706,000 people in the city, way down from 1.85 million during its industrial heyday in 1950. — The official unemployment is now 18.6 percent, and fewer than half of the city's residents over the age of 16 are working. Per capita income is an extremely low $15,261 a year, which means there's not all that much tax revenue pouring in. — Low tax revenue, in turn, means that city services are suffering. Detroit has the highest crime rate of any major city, and fewer than 10 percent of crimes get solved. The average response time for an emergency call is 58 minutes. Some 78,000 buildings are abandoned or blighted and there are an estimated 12,000 fires every year. About 40 percent of the city's streetlights don't work. — High crime and blight are driving even more residents out of the city. It's also driving down property values, which means many residents have stopped paying property taxes. The city collected about 68 percent of the property taxes owed in 2011.

Both of those things put a further strain on Detroit's finances. — Detroit is sagging under decades of bad governance. “The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” Orr wrote in May . “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.” (Detroit has been a one-party city run by Democrats since 1962 .) — Meanwhile, Detroit owes around $18.5 billion to its creditors. That includes about $6 billion in health-care and life insurance obligations, plus roughly $3.5 billion in pension costs racked up over the years. Given its ever-worsening economic slide, Detroit was in no position to pay off all its obligations. Over the past few months, Orr has tried to convince the city's various creditors, including the city's unions and pension boards, to take far less than they were owed in order to restructure the city's finances (in some cases, pennies on the dollar). But he was unsuccessful, so now the city is filing for bankruptcy protection.

The Detroit Free Press explains the next steps here: "The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities." Further reading: --My colleague Michael Fletcher has much more on the Detroit bankruptcy. --A look at the various arguments within Detroit over which creditors should get hit hardest. "But city retirees, facing the prospect of sharply reduced benefits whether in bankruptcy or under Detroit’s restructuring proposal, think they stand squarely on the moral high ground because despite the poverty of many current and retired members, they have already offered big concessions." business Detroit files for bankruptcy - Jul. 18, 2013 Detroit files for bankruptcy by Chris Isidore @CNNMoney July 18, 2013: 7:25 PM ET Protestors in Detroit last month objected to plans to cut pension benefits of city workers and retirees. Detroit filed for bankruptcy Thursday, becoming the nation's largest public sector bankruptcy.

The move could slash pension benefits to city workers and retirees, and leave bond holders with only pennies on the dollar. The bankruptcy was filed by Emergency Manager Kevyn Orr and approved by Michigan Gov. Rick Snyder. Snyder said the financial condition of the city left him no choice. "Now's our opportunity to stop 60 years of decline," Snyder said at a Friday news conference with Orr. "How long had this been going on and people were kicking the can down the road and not doing something? We're doing something." Snyder has said that 38% of the city's budget is being spent on "legacy costs," such as pensions and debt service. He said police take almost an hour to respond to calls, compared to a national average of 11 minutes, and that 40% of street lights in the city are turned off. "Does anybody think it's OK to have 40-year-old trees growing through the roofs of dilapidated houses," Orr said. But public employee unions are sure to fight the move, charging that the city did not negotiate in good faith and should not be allowed to walk away from obligations made to employees and retirees. The Detroit Fire Fighters Association said it was "very disappointed" with the bankruptcy filing.

"We are working with other Detroit employees to form a unified coalition to address the financial concerns of Detroit," the group said. "Detroit's Fire Fighters will continue to protect and serve during this difficult time, regardless of the economic challenges." Related: Retired Detroit firefighter -- 'My pension is what I was promised' Orr already halted payments on about $2 billion in debt last month, saying the city needed to preserve its dwindling supply of cash. The city faces total liabilities of about $18 billion. Orr's reorganization plan calls for cutting $11.5 billion in debt down to $2 billion. That would mean that investors and retirees would receive an average of just 17% of what they are owed. Specific plans for the cuts are unknown at this time. No municipal bankruptcy has ever resulted in involuntary cuts to retiree benefits, said Michael Sweet, a California bankruptcy attorney. "It's relatively easy to blow off a creditor. It's much harder when it's people who are the fabric of your community," he said. "You need a police force, you need a fire department.

You're saying [to them] you're not worth what you were previously promised." Related: Casinos, not cars, are keeping Detroit afloat Sweet said that case law on whether pensions can be cut this way is very limited, and it could take years for a court fight over such cuts to work its way to the U.S. Supreme Court. Given the poor state of funding for many public sector pension funds nationwide, "it's a big enough question, that (the Supreme Court) is where it likely will have to go," he said. When employees of a bankrupt business lose their promised pensions, the Pension Benefit Guaranty Corp. steps in and provides a minimal level of benefits. But that federal agency doesn't back pensions in the public sector. Related: Detroit bankruptcy filing came with only 5 minutes to spare Retirees and city employees say they can't accept cuts in their pension benefits. "How am I supposed to live without my pension?" said David Sole, 65, after a protest in Detroit last month. Sole retired from the city's water department in January after 22 years. Investors say the bankruptcy will make it more difficult for cities and towns everywhere to raise the money they need to build bridges, schools and other infrastructure.

It will also hurt municipal bonds held by individual investors. There are more than $1 trillion worth of bonds at risk, said Peter Hayes, head of municipal bonds at BlackRock. He said there will be a ripple effect nationwide. Related: What's next for Detroit Detroit may sell its art treasures Orr said that the city needs to cut debt to restore services and lower costs, such as taxes and insurance, which he says have chased businesses and residents out of the city. Detroit's population has fallen 28% since 2000. The unemployment rate, while down from a peak of 27.8% in the summer of 2009 -- when General Motors ( GM ) and Chrysler Group were going through their own bankruptcies -- is still at 16.3%, nearly twice Michigan's statewide average. While the auto industry has enjoyed a resurgence with strong car sales and profits, most of the industry's Michigan plants lay outside of city limits. -- CNN's Poppy Harlow and CNNMoney's James O'Toole and Aaron Smith contributed to this report. Are you a Detroit city employee or retiree? We want to hear your story. Please contact CNNMoney .

CNNMoney (New York) First published July 18, 2013: 4:44 PM ET In largest-ever U.S. city bankruptcy, cuts coming for Detroit creditors, retirees | Reuters Tue Dec 3, 2013 | 5:59 PM EST In largest-ever U.S. city bankruptcy, cuts coming for Detroit creditors, retirees 1/12 A man walks past graffiti in Detroit, Michigan, December 3, 2013. Reuters/Joshua Lott + 2/12 A man rides his bike past graffiti that reads ''Bankruptcy'' in Detroit, Michigan, December 3, 2013. Reuters/Joshua Lott + 3/12 Protesters rally outside the Detroit Federal Court House during a bankruptcy hearing declaring Detroit is eligible for the biggest municipal bankruptcy in U.S. history, in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 4/12 A patron at a restaurant receives his breakfast from a server as a television displayed on a wall shows footage of the bankruptcy hearing in Detroit, Michigan, December 3, 2013.

Reuters/Joshua Lott + 5/12 Protesters rally outside the Detroit Federal Court House during a bankruptcy hearing declaring Detroit is eligible for the biggest municipal bankruptcy in U.S. history, in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 6/12 Detroit Emergency Manager Kevyn Orr addresses the media following a ruling by U.S. District Judge Steven Rhodes that Detroit is eligible for the biggest municipal bankruptcy in U.S. history in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 7/12 Protesters rally outside the Detroit Federal Court House as Detroit Police block Lafayette Avenue from traffic during a bankruptcy hearing declaring Detroit is eligible for the biggest municipal bankruptcy in U.S. history in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 8/12 The Detroit skyline is seen from the north side of the city in Detroit, Michigan, December 3, 2013. Reuters/Joshua Lott + A television screens footage of the bankruptcy hearing in Detroit, Michigan, December 3, 2013.

Reuters/Joshua Lott + 10/12 Protesters rally outside the Detroit Federal Court House during a bankruptcy hearing declaring Detroit is eligible for the biggest municipal bankruptcy in U.S. history, in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 11/12 Protesters rally outside the U.S. Federal Courthouse during a bankruptcy ruling by U.S. District Judge Steven Rhodes that Detroit is eligible for the biggest municipal bankruptcy in U.S. history in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + 12/12 Detroit Emergency Manager Kevyn Orr addresses the media following a ruling by U.S. District Judge Steven Rhodes that Detroit is eligible for the biggest municipal bankruptcy in U.S. history in Detroit, Michigan December 3, 2013. Reuters/Rebecca Cook + By Joseph Lichterman and Bernie Woodall | DETROIT DETROIT A federal judge on Tuesday formally declared Detroit bankrupt, a landmark ruling that clears the way for potentially sweeping cuts to city worker pensions and retirement benefits and for steep and possibly precedent-setting losses to the cash-strapped city's bond holders. The ruling by U.S.

Judge Steven Rhodes, who cited the city's dismal finances and $18 billion owed to a multitude of creditors in support of his decision, marks a watershed in the history of Detroit. Once known as the cradle of the U.S. auto industry, the arsenal of democracy and the birthplace of Motown music, Detroit now adds an ignominious new title: largest bankrupt city in U.S. history. Detroit's emergency manager, Kevyn Orr, in a news conference after the court hearing, said the city will seek to file a plan of readjustment - the city's roadmap toward financial solvency - by early January. He said negotiations are continuing with unions "even now," and called on all parties to bridge gaps in order to conclude Detroit's bankruptcy and move back toward fiscal stability. In a financial plan he had laid out prior to the bankruptcy filing, Orr had proposed offering unsecured creditors shares in a $2 billion note in exchange for $11 billion in unsecured debt. Orr declined to state on Tuesday whether that remains his plan, and also refused to say how much of a reduction he will seek from secured creditors.

Rhodes, in his ruling that Detroit is eligible, accepted the city's contention that it is broke and that negotiations with its thousands of creditors were infeasible. That was enough to declare Detroit bankrupt under Chapter 9 of the federal bankruptcy code, Rhodes ruled. In a symbolic setback for the city, however, Rhodes found that Orr did not negotiate in good faith with creditors prior to the city's July 18 bankruptcy filing. "It is indeed a momentous day," Rhodes said as he read aloud for more than an hour from a written statement in a packed courtroom. "We have here a judicial finding that this once-proud and prosperous city cannot pay its debts. It's insolvent. It's eligible for bankruptcy. At the same time it has an opportunity for a fresh start." Rhodes also said the city could cut pensions as part of the restructuring, ruling against an argument that Michigan's constitution protects them from being slashed. However, Rhodes warned he will not rubber-stamp any pension cuts. His ruling encompassed fine points of law as well as broad observations about Detroit's fiscal health. He stated that his findings were informed by a breakdown in Detroit's public infrastructure and rising crime rate.

Rhodes will also issue a written opinion on Wednesday, which he said is around 140 pages. STRUGGLING CITY Detroit is burdened by $18.5 billion in debt as it struggles to provide even the most basic services to 700,000 residents. About 40 percent of the city's streetlights do not work and about 78,000 abandoned buildings litter the city, whose population peaked at 1.8 million in 1950. "The city no longer has the resources to provide its residents with basic police, fire and EMS services," Rhodes said. He noted the average police response time is 58 minutes, more than five times the national average of 11 minutes. "Without the protection of Chapter 9 the city will be forced to continue on the path it was on before this case," Rhodes said later in his ruling. The judge declined to stay the bankruptcy proceedings as potential appeals proceed through the courts. He also turned down an effort to allow any appeals of his ruling to go directly to the 6th Circuit U.S. Court of Appeals. Rhodes declared that motions to appeal the case must first be filed in bankruptcy court.

He previously stayed all state court action in the case. The American Federation of State, County and Municipal Employees Council 25 filed a notice of appeal of Rhodes' ruling in the bankruptcy court. The appeal, expected to be joined by the city's largest pension funds, claims the judge erred in ruling that federal bankruptcy law trumps public employee pension protections embedded in the Michigan Constitution. Lynn Brimer, attorney for the Retired Detroit Police Members Association, said it appeared that Rhodes "made it clear that they (pensioners) should not be treated as a general unsecured creditor." She also said that the city's retirees should not be treated the same as bondholders who performed due diligence and knew the risks of investing in Detroit while city workers were promised years ago that they would be relatively secure in retirement. Sharon Levine, attorney for the AFSCME union, said that any cuts to pensions for the city's retirees would be harmful, because the average city retiree receives $19,000 in annual pension benefits.

"When we were coming out of the courthouse it was snowing, and people were asking us, ‘Am I going to lose my house?' NEW CHAPTER Tuesday's ruling begins a new chapter in the case that first arrived in federal court with Detroit's July 18 bankruptcy petition. As emergency manager Orr works toward submitting a plan to readjust Detroit's more than $18 billion in debt - to be accomplished chiefly by forcing creditors to take a discount on what the city owes them - an appeals process will begin in the federal courts. In order to meet federal eligibility requirements, Detroit had to prove that it is insolvent, it was authorized to file for bankruptcy and that it negotiated with creditors in good faith or that negotiations were impractical. Orr, a former bankruptcy lawyer, was appointed in March by Michigan Governor Rick Snyder, a Republican. In his lead-up to the ruling, Rhodes offered a detailed analysis of key arguments made by the city's labor unions, retirees and pension funds opposed to the bankruptcy. He found that Chapter 9 of the federal bankruptcy code is constitutional and while Michigan's constitution protects public pension benefits as contracts, those contracts can be impaired in a municipal bankruptcy.

Michigan Attorney General Bill Schuette, who has argued that pension rights are protected by the state constitution, said in a statement that he was "deeply disappointed" by Rhodes' ruling that pensions could be diminished. Schuette said he will file amicus briefs with the court reaffirming his support for protecting pensions. Rhodes also found that the 2012 Michigan law that allowed the city to file for bankruptcy with the governor's authorization was constitutional. Before Orr filed for bankruptcy, he obtained approval from Governor Snyder. Despite ruling that the city met the test for bankruptcy, Rhodes found fault with how Orr proceeded toward the bankruptcy filing. The city should have more "openly and forthrightly" discussed bankruptcy as a possibility to rectify Detroit's problems in the months and years leading up to the filing. A series of meetings and presentations the city held with creditors leading up to the filing did not meet the good-faith requirement, he said. The city's financial troubles were so bad that Detroit's filing was inevitable, Rhodes said. "The court must conclude that the bankruptcy filing by the city of Detroit was a foregone conclusion during 2013, but waiting too long does not constitute bad faith," Rhodes said.

The city acted in good faith when it ultimately filed its bankruptcy petition, largely because it was unfeasible for the city to negotiate with its thousands of creditors. Analysts, however, do not expect a rush of copycat bankruptcy filings by distressed municipalities given the arduous process of proving eligibility, although the ruling does provide something of a template that others may attempt to follow in time. "It could create more bankruptcies because it's a way to get out of pension contracts," said Richard Ciccarone, president of Merritt Research Services. "It more than likely will mean that hard-pressed, stressed credits with legacy liabilities will have to consider the option." UNION CONCERNS With Rhodes' ruling in hand, attention now turns to Detroit's negotiations with creditors, retirees, unions and pension funds. Detroit says about half its liabilities stem from retiree benefits, with $5.7 billion in liabilities relating to retiree healthcare and another $3.5 billion from pensions. Likely cuts to retiree pensions and changes in healthcare benefits are at the heart of union concerns about Detroit's bankruptcy. And a separate issue, the future of the collection of the Detroit Institute of Arts, a prized city asset, has drawn attention inside Detroit and around the world.

The museum includes paintings by Vincent van Gogh and Henri Matisse, an original cast of Auguste Rodin's "The Thinker," and a fresco mural by Mexican artist Diego Rivera. Orr, in remarks after Rhodes' ruling on Tuesday, said only about 500 pieces of the museum's collection might be affected by Detroit's bankruptcy. He declined to offer any details but said an announcement will be made soon. He also emphasized the need for the city to move on. "While we are very pleased, we remain very concerned to adjust the city's debt and improve the level of service for its citizens and to also prepare for the city to exit this receivership in a fashion that restores democracy to the city." Some critics of Orr have claimed his position is undemocratic because it leaves elected officials like Mayor Dave Bing and the city council without power to set policy or make binding decisions.

Harold Schaitberger, general president of the International Association of Fire Fighters based in Washington, said, "Going forward, this is as much about politics and the priorities of public officials as it is about bankruptcy and the court." Schaitberger said that elected officials in the United States are expected to continue to "push for austerity no matter the cost to the lives of workers and public safety." Rhodes in announcing his ruling said asset sales or other one-time infusions of cash will not solve Detroit's long-term financial troubles. "A one-time infusion of cash, whether from an asset sale or borrowing, delays the inevitable," he said. (Additional reporting by Karen Pierog in Chicago, Ben Klayman in Detroit and Lisa Lambert in Washington; editing by David Greising, Dan Burns and Matthew Lewis) ADVERTISEMENT Billions in Debt, Detroit Tumbles Into Insolvency - The New York Times The New York Times U.S. |Billions in Debt, Detroit Tumbles Into Insolvency Search Continue reading the main story Photo The abandoned Brewster Wheeler housing projects, right, and the General Motors headquarters in downtown Detroit.

Credit Fabrizio Costantini for The New York Times DETROIT — Detroit, the cradle of America’s automobile industry and once the nation’s fourth-most-populous city, filed for bankruptcy on Thursday, the largest American city ever to take such a course. The decision, confirmed by officials after it trickled out in late afternoon news reports, also amounts to the largest municipal bankruptcy filing in American history in terms of debt. “This is a difficult step, but the only viable option to address a problem that has been six decades in the making,” said Gov. Rick Snyder, who authorized the move after a recommendation from the emergency financial manager he had appointed to resolve Detroit’s dire financial situation. Not everyone agrees how much Detroit owes, but Kevyn D. Orr, the emergency manager, has said the debt is likely to be $18 billion and perhaps as much as $20 billion. Continue reading the main story For Detroit, the filing came as a painful reminder of a city’s rise and fall. “It’s sad, but you could see the writing on the wall,” said Terence Tyson, a city worker who learned of the bankruptcy as he left his job at Detroit’s municipal building on Thursday evening.

Like many there, he seemed to react with muted resignation and uncertainty about what lies ahead, but not surprise. “This has been coming for ages.” Advertisement Continue reading the main story Detroit expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry, and then shrank away in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets. From here, there is no road map for Detroit’s recovery, not least of all because municipal bankruptcies are rare. State officials said ordinary city business would carry on as before, even as city leaders take their case to a judge, first to prove that the city is so financially troubled as to be eligible for bankruptcy, and later to argue that Detroit’s creditors and representatives of city workers and municipal retirees ought to settle for less than they once expected. Some bankruptcy experts and city leaders bemoaned the likely fallout from the filing, including the stigma.

They anticipate further benefit cuts for city workers and retirees, more reductions in services for residents, and a detrimental effect on borrowing. “For a struggling family I can see bankruptcy, but for a big city like this, can it really work?” said Diane Robinson, an office assistant who has worked for the city for 20 years. “What will happen to city retirees on fixed incomes?” But others, including some Detroit business leaders who have seen a rise in private investment downtown despite the city’s larger struggles, said bankruptcy seemed the only choice left — and one that might finally lead to a desperately needed overhaul of city services and to a plan to pay off some reduced version of the overwhelming debts. In short, a new start. Photo Kevyn D. Orr, emergency manager, at a news conference on Thursday about the filing. Credit Paul Sancya/Associated Press “The worst thing we can do is ignore a problem,” said Sandy K. Baruah, president of the Detroit Regional Chamber. “We’re finally executing a fix.” The decision to go to court signaled a breakdown after weeks of tense negotiations, in which Mr. Orr had been trying to persuade creditors to accept pennies on the dollar and unions to accept cuts in benefits.

All along, the state’s involvement — including Mr. Snyder’s decision to send in an emergency manager — has carried racial implications, setting off a wave of concerns for some in Detroit that the mostly white Republican-led state government was trying to seize control of Detroit, a Democratic city where more than 80 percent of residents are black. Advertisement Continue reading the main story The nature of Detroit’s situation ensures that it will be watched intensely by the municipal bond market, by public sector unions, and by leaders of other financially challenged cities around the country. Just over 60 cities, towns, villages and counties have filed under Chapter 9 , the court proceeding used by municipalities, since the mid-1950s. Leaders in Washington and in Lansing, the state capital, issued statements of concern late Thursday. A White House spokeswoman said President Obama and his senior team were closely monitoring the situation. “While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities,” Amy Brundage, the spokeswoman, said in a statement.

Please verify you're not a robot by clicking the box. Invalid email address. Please re-enter. You must select a newsletter to subscribe to. Sign Up Privacy Policy The debt in Detroit dwarfs that of Jefferson County, Ala., which had been the nation’s largest municipal bankruptcy, having filed in 2011 with about $4 billion in debt. The population of Detroit, the largest city in Michigan, is more than twice that of Stockton, Calif., which filed for bankruptcy in 2012 and had been the nation’s most populous city to do so. Other major cities, including New York and Cleveland in the 1970s and Philadelphia two decades later, have teetered near the edge of financial ruin, but ultimately found solutions other than federal court. Detroit’s struggle, experts say, is particularly dire because it is not limited to a single event or one failed financial deal, like the troubled sewer system largely responsible for Jefferson County’s downfall.

Instead, numerous factors over many years have brought Detroit to this point, including a shrunken tax base but still a huge, 139-square-mile city to maintain; overwhelming health care and pension costs; repeated efforts to manage mounting debts with still more borrowing; annual deficits in the city’s operating budget since 2008; and city services crippled by aged computer systems, poor record-keeping and widespread dysfunction. All of that makes bankruptcy — a process that could take months, if not years, and is itself expected to be costly — particularly complex. Photo An abandoned hydrant. City services have been cut before; fears are that the bankruptcy filing may lead to more cuts. Credit Fabrizio Costantini for The New York Times “It’s not enough to say, let’s reduce debt,” said James E. Spiotto, an expert in municipal bankruptcy at the law firm of Chapman and Cutler in Chicago. “At the end of the day, you need a real recovery plan. Otherwise you’re just going to repeat the whole thing over again.” The municipal bond market will be paying particular attention to Detroit because of what it may mean for investing in general obligation bonds.

In recent weeks, as Detroit officials have proposed paying off small fractions of what the city owes, they have indicated they intend to treat investors holding general obligation bonds as having no higher priority for payment than, for instance, city workers — a notion that conflicts with the conventions of the market, where general obligation bonds have been seen as among the safest investments and all but certain to be paid in full. Advertisement Continue reading the main story Leaders of public sector unions and municipal retirees around the nation will be focused on whether Detroit is permitted to slash pension benefits, despite a provision in the State Constitution that union leaders say bars such cuts. Officials in other financially troubled cities may feel encouraged to follow Detroit’s path, some experts say. A rush of municipal bankruptcies appears unlikely, though, and leaders of other cities will want to see how this case turns out, particularly when it comes to pension and retiree health care costs, said Karol K. Denniston, a bankruptcy lawyer with Schiff Hardin who is advising a taxpayer group that came together in Stockton after its bankruptcy. “If you end up with precedent that allows the restructuring of retirement benefits in bankruptcy court, that will make it an attractive option for cities,” Ms. Denniston said.

“Detroit is going to be a huge test kitchen.” Around this city, there was widespread uncertainty about what bankruptcy might really mean, now and in the long term. Officials said city workers were being sent letters, notifying them that city business would proceed as usual, from bills to permits. A hot line was planned for residents and others with questions and worries. For some Detroiters, recent memories of bankruptcies by Chrysler and General Motors — and the re-emergence of those companies — appeared to have calmed nerves. But experts say corporate bankruptcy procedures are significantly different from municipal bankruptcies. In municipal bankruptcies, for instance, the ability of judges to intervene in how a city is run is sharply limited. And municipal bankruptcies are a form of debt adjustment, as opposed to liquidation or reorganization. Here, residents are likely to see little immediate change from the way the city has been run since March, when Mr. Orr arrived to oversee major decisions. A bankruptcy lawyer, he is widely expected to continue to run Detroit during a legal process. Mayor Dave Bing and Detroit’s elected City Council are still paid to hold office and are permitted to make decisions about day-to-day operations, though Mr. Orr could remove those powers. Mr.

Orr has said that as part of any restructuring he wants to spend about $1.25 billion on improving city infrastructure and services. But a major concern for Detroit residents remains the possibility that services, already severely lacking, might be further diminished in bankruptcy. About 40 percent of the city’s streetlights do not work, a report from Mr. Orr’s office showed. More than half of Detroit’s parks have closed since 2008. Monica Davey reported from Detroit, and Mary Williams Walsh from New York. A version of this article appears in print on July 19, 2013, on Page A1 of the New York edition with the headline: Billions in Debt, Detroit Tumbles Into Insolvency. Order Reprints | Today's Paper | Subscribe

Question: Which US city filed for bankruptcy in July 2013?
Answer: DETROIT