The city of Detroit has filed for Chapter 9 bankruptcy protection in federal court today, making it the largest bankruptcy in U.S. history.
Over recent years, the city has fallen into billions of dollars in debt, decades of mismanagement, and an exodus of its population resulting in a severe loss of tax revenue. The Chapter 9 filing will begin a 30- to 90-day period to see if Detroit is eligible for Chapter 9 protection. The bankruptcy petition will also seek protection from creditors and unions who are trying to renegotiating $18.5 billion in debt and other liabilities.
That 30- to 90-day eligibility could be extended if creditors mount a significant challenge to the city’s eligibility for bankruptcy. With a population of about 700,000, Detroit’s case for bankruptcy could be precedent setting.
Home to General Motors, which recently underwent a very public bankruptcy filing, the US auto giant released a statement that it, “is proud to call Detroit home and today’s bankruptcy declaration is a day that we and others hoped would not come.”
However, as with its own filing, “We believe… that today also can mark a clean start for the city,” continues the statement. “We hope that all parties recognize the sacrifices to follow can help rebuild a stronger Detroit with a level of services and quality of life its citizens deserve. A healthy auto industry will play a part in Detroit’s comeback story and GM is doing its part.”
GM also said that despite the filing it does, “not anticipate any impact” to its daily operations.
[Source: USA Today]