Detroit became the biggest U.S. city to file for bankruptcy, seeking court protection from creditors while it tries to eliminate a budget deficit and cut long-term debt.
The city listed assets and debt of more than $1 billion in a Chapter 9 petition filed today in federal court in Detroit. Chapter 9 of the U.S. Bankruptcy Code is reserved for municipalities and differs from the rules used by bankrupt companies in Chapter 11.
Kevyn Orr, the state-appointed emergency fiscal manager, warned in May that the city might run out of cash. His proposal to restructure more than $17 billion in debt and long-term obligations includes cutting pension payments, ending cost-of-living increases, removing some workers from the system and making the rest pay more.
“Without a significant restructuring of its debt, the city will be unable to break the cycle of damaging cutbacks in essential municipal services and investments,” Mr. Orr said in a report.
Detroit joins Jefferson County, Alabama, and the California cities of San Bernardino and Stockton in bankruptcy.
