10:09 20 July 2013
Kevyn Orr, Detroit’s appointed emergency manager, has filed for Chapter 9 protection in federal bankruptcy court. This makes Detroit the largest city in the United States history to file for bankruptcy. Mr Orr confirmed that the city’s long-term debt is more than $14billion and could be as much as $20billion.
In a letter that was included in the filing, Governor Rick Snyder said: 'The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,'
'The city's creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.'
Based on reports there are fears that health care and other benefits for retired residents will be affected with the filing. However, reportedly pensions would be safe if bankruptcy is approved as these are protected under Michigan’s state constitution.
If bankruptcy is approved, the city’s asset will be liquidated to satisfy demands for payment of various creditors.
Car factories have been moving out of the municipal limits for decades. The city’s population was reduced to nearly 2million in 1950 to around 700,000 currently. The decline in the automotive industry and the shrinking population has resulted to a shrinking tax base.
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