Detroit Files for Bankruptcy

What's Hot

Do This or Your iPhone Bill May SkyrocketSave

23 Upgrades Under $50 to Make Your House Look AwesomeAround The House

Trump Worth $10 Billion Less Than If He’d Simply Invested in Index FundsBusiness

11 Places in the World Where You Can Afford to Retire in StyleMore

What You Need to Know for 2017 Obamacare EnrollmentFamily

8 Things Rich People Buy That Make Them Look DumbAround The House

32 of the Highest-Paid American SpeakersMake

Amazon Prime No Longer Pledges Free 2-Day Shipping on All ItemsMore

More Caffeine Means Less Dementia for WomenFamily

9 Tips to Ensure You’ll Have Enough to RetireFamily

30 Awesome Things to Do in RetirementCollege

5 Spots Where Retirees Can Live for Less Than $40,000Real Estate

10 Ways to Reduce Your Homeowner’s Insurance RatesFamily

10 Ways to Pull Together the Down Payment for a HomeCredit & Debt

Chew on This: The Story Behind Your Hershey’s Halloween TreatsBusiness

The wheels have fallen off the automotive capital of the world.

Motown is officially Po’ Town.

The most populous city in Michigan has filed for Chapter 9 bankruptcy. It’s the largest American city ever to do so, Detroit Free Press says.

We wrote a few months ago about how the city was so broke it took a loan from automakers to keep ambulances and police cars on the streets. State governor Rick Snyder also appointed an emergency financial manager, a bankruptcy lawyer named Kevyn Orr, and gave him most of city officials’ authority to try saving it.

Orr has decided salvation will have to come through bankruptcy. The city has about $18.5 billion in debt and other liabilities, DFP says. Nearly half of that is attributed to two pension funds, which filed lawsuits seeking to prevent a bankruptcy filing. But Governor Snyder authorized the bankruptcy filing, NBC News says:

“The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future,” the governor said in a statement. “This is a difficult step, but the only viable option to address a problem that has been six decades in the making.”

Orr had proposed a repayment plan to creditors that would’ve given many about 10 cents on the dollar, NBC News says. The pension funds would’ve gotten an even worse deal, and Orr said if negotiations failed bankruptcy was the next option.

So what happens when a city goes bankrupt? Bankrate and NPR tackled the question last year. There’s usually a substantial reduction in services, including firefighting, garbage collection and library branches. City maintenance stops. Taxes will probably go up at some point.

But in Detroit’s case, it’s hard to see the city go anywhere but up from here. Only a third of its ambulances were running in the first quarter of the year and there are nearly 78,000 abandoned buildings, Reuters says.

It takes time to recover from a bankruptcy, but when it’s a person vs. a city, there are steps to do it as quickly as possible. Below is the video from our recent story, How to Rebuild Credit After Bankruptcy

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 7 Ways to Save More at Big Lots

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,714 more deals!