Detroit Files for Bankruptcy, the Largest Municipal Bankruptcy Filing in U.S. History
On July 18, 2013, Detroit filed for bankruptcy, marking it as the largest municipal bankruptcy in U.S. history. This unprecedented move occurred after the city faced a staggering debt estimated between $18 billion and $20 billion, prompting Governor Rick Snyder to seek a solution through a Chapter 9 filing. Municipal bankruptcies are infrequent, with only about 60 cases since 1950, highlighting the significance of Detroit's situation. The city, once a thriving hub for the automobile industry, was struggling to maintain essential services, leading to anticipated reductions in municipal services and cuts to employee benefits. Following the bankruptcy filing, city leaders began strategizing for a federal court presentation to address the financial crisis. In September 2014, a resolution was passed by the Detroit City Council to support $275 million in financing aimed at helping the city exit bankruptcy and stabilize its financial future. This event underscored the challenges faced by municipalities in managing debt and the broader implications for urban governance and community well-being.
Detroit Files for Bankruptcy, the Largest Municipal Bankruptcy Filing in U.S. History
Detroit Files for Bankruptcy, the Largest Municipal Bankruptcy Filing in U.S. History
Detroit, the largest city in Michigan and the former center of America's automobile industry, filed for bankruptcy on July 18, 2013. Municipal bankruptcies are rare—only about 60 cities, towns, villages, and counties have filed under Chapter 9 since 1950—and this was the largest municipal bankruptcy filing in America's history.
Governor Rick Snyder made the decision on the recommendation of his financial manager, Kevyn Orr, who said that Detroit's debt amounted to $18-20 billion and that an overhaul of the city's services and a plan to pay off a reduced version of the debt was needed. As the city leaders planned to present their case to a federal court judge, reductions in services to Detroit residents were expected, as well as benefit cuts to city works and retirees.
In September 2014, the Detroit News reported that the Detroit City Council had approved a resolution supporting $275 million in bankruptcy exit financing, which Detroit will need to restructure and pay off debt after it emerges from bankruptcy court.