Detroit Becomes Largest City in U.S. History to File for Bankruptcy

Earlier this month, the city of Detroit filed for Chapter 9 bankruptcy and in the process became the biggest municipal bankruptcy in U.S. history. Detroit, known as former manufacturing power, has struggled to generate revenue as its population has declined by about 25 percent over the last decade.

Detroit’s emergency manager Kevyn Orr said the bankruptcy filing was necessary to keep the city afloat, as worker pension plans and a declining tax base have made the city insolvent. According to the Associated Press, last week U.S. Bankruptcy Court Judge Steven Rhodes agreed to the expedited hearing requested by Orr in response to a Michigan court judge’s order for Orr to withdraw the Chapter 9 bankruptcy filing on state constitutional grounds.

Two of the city’s biggest labor unions, the United Auto Workers and American Federation of State, County and Municipal Employees Council 25, have said that any cuts to worker pensions would be state constitutional violations.

Last year, we discussed how Stockton, Calif. became the largest U.S. city to file for bankruptcy. Now, Detroit is in the same position. The bankruptcies show that even cities struggle with paying creditors. They also show how bankruptcy can happen at any time, even with multi-million dollar operating budgets.

Much like a Chapter 9 bankruptcy, a Chapter 13 bankruptcy allows people to keep control of their possessions while working on a repayment plan and restructuring debt. If your financial situation is a problem and you want to end collection attempts or discharge debts, contact our Washington DC and Maryland bankruptcy lawyer now for a free consultation.

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