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Detroit Goes Broke, Files Chapter 9 Bankruptcy
On Thursday, Detroit became the largest American city to file for Chapter 9 bankruptcy protection. Law firm Jones Day is restructuring counsel for the bankruptcy. While approving the voluntary Chapter 9 petition Governor Rick Snyder said, “I knew from the outset that it would be difficult to reverse 60 years of decline … We must face the fact that the City cannot and is not paying its debts as they become due, and is insolvent.”
The full figure of Detroit’s debt is yet unknown, but the NY Times reported according to Kevyn D. Orr, the emergency manager, the city’s debt is between $18 billion and $20 billion. Detroit, the city of automobiles has a special place in the history of industrialization in America. A city, which in the 1950 sheltered 1.8 million people, Detroit is filled today with abandoned buildings and has only 700,000 residents. A report from the office of the city’s emergency manager shows 40 percent of streetlights do not work and more than half of the parks have closed since 2008.
A White House spokeswoman, Amy Brundage, said, “While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities.”
People are also worried how long it would take to declare a city of Detroit’s size fit for bankruptcy, given the mess in record keeping. Residents worry that civil services can reach unsustainably poor levels while the court takes its decision. Experts note that in the case of Stockton, which is much smaller than Detroit, it took nine months to decide the city was eligible for bankruptcy.
Out of the 62 known municipal bankruptcies filed since the 1950s, 25 have been filed in the last two years.Detroit Goes Broke, Files Chapter 9 Bankruptcy by Scott