One of the nation’s largest cities, Detroit, filed for bankruptcy Thursday, making it the country’s largest municipal bankruptcy.
Michigan Gov. Rick Snyder said the city’s poor financial condition left him without options, and the city was unable to meet its obligations, according to CNN Money
Unions for the public employees affected by the Chapter 9 filing will probably fight the move, CNN reported. That’s because they’ll suffer a big impact to their pensions and retirement from the bankruptcy.
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The city stopped payments on $2 billion in debt in June, and faces liabilities of $18 billion. The city’s plan calls for getting $11.5 billion in debt down to just $2 billion – and that means retirees and investors would receive only 17 percent of what they should, CNN said.
Detroit has become a symbol of “decline, decay and crime,” The Chicago Tribune reported.
Its population has dropped by more than a million since 1950, corruption has filtered through the government, and the murder rate is at the highest in 40 years, the Tribune said.
In June, the city offered creditors a plan that gave them pennies on each dollar of their investment, but most rejected the offer. Particularly upset were Detroit’s two pension funds.
The creditors are expected to fight the bankruptcy, and the Tribune quoted bankruptcy attorney Douglas Bernstein as saying the case will probably last one to three years and be expensive.
“This could run to tens of millions to hundreds of millions of dollars,” he told the newspaper.
The Wall Street Journal reported that a video
on Michigan’s website
shows Snyder saying, “This was a difficult and painful decision but I believe there are no other viable options. This is a situation that’s been 60 years in the making in terms of the decline of Detroit. From a financial point of view, let me be blunt, Detroit is broke.”
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