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Detroit becomes America's largest city ever to file for bankruptcy

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Detroit (shutterstock)
Detroit (shutterstock)

The city of Detroit has filed for chapter 9 bankruptcy protection, marking a years-long decline for what was once considered one of the country's leading technological and innovation centers. While a city filing for bankruptcy isn't unheard of (New York City nearly filed for bankruptcy in the '70s), Detroit is the largest US city to ever do so, reports The New York Times. While the city was once the fourth-largest in the US, its population has dropped dramatically in recent years — from 1.8 million in the 1950s to about 700,000 currently. Challenges the city has faced include a decreasing tax base left with a sprawling,139-square-mile city to maintain, "dysfunctional" city services, multiple attempts to manage growing debt while continuing to borrow more money, and an annual budget deficit every year going back to 2008.

While Detroit hasn't publicly disclosed exactly how much debt it has, emergency manager Kevyn D. Orr (appointed by Michigan governor Rick Snyder) has said he believes it to be in the $18 to $20 billion range. The previous largest city to file for bankruptcy was Jefferson County, AL, which filed in 2011 with about $4 billion in debt. The decision to file for bankruptcy comes after weeks of negotiations in which the Times reports that Orr was trying to persuade its creditors to accept "pennies on the dollar" for Detroit's outstanding debts, as well as convince various unions to agree to benefit cuts.

As for what comes next, it's not entirely clear — residents likely won't see any major changes right away from the way the city has been run since Orr took over in March. But going forward there's no real clear plan of action for what the city will do to get itself back on track, largely because a municipality filing for bankruptcy is a relatively rare event. While there's a lot of concern that the stigma of going bankrupt will stick with Detroit for some time, others are hoping that it'll be the catalyst needed to finally give the city a much-needed overhaul of its municipal services. Still, there's no doubt that it's a disappointing development for a city that was once a leader of industry but has struggled significantly to find its place in the 21st century.