Detroit Files for Chapter 9 Bankruptcy

Detroit filed this afternoon for Chapter 9 bankruptcy protection in federal court, reports The Detroit Free Press (

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.

USA Today ( details that the city doesn’t need approval to continue services. The police, fire, water, sewer and public works are completely unaffected by the bankruptcy filing for now and will operate as usual. However, cuts are possible in the future.

But, the case will also set a legal precedent that will be watched closely by other major cities across the country struggling under the weight of years of accumulated debt and underfunded pensions covering millions of public sector retirees, reports NBC News (

“Everyone will say, ‘Oh well, it’s Detroit. I thought it was already in bankruptcy,'” said Michigan State University economist Eric Scorsone.

“But Detroit is not unique. It’s the same in Chicago and New York and San Diego and San Jose. It’s a lot of major cities in this country. They may not be as extreme as Detroit, but a lot of them face the same problems.”

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