But the city’s employee pension plans – which are owed some nine billion dollars – filed a lawsuit to prevent any cuts to retirement benefits.
The bankruptcy filing places that case on hold and comes days before what could have been a key hearing.
It will be up to a federal judge to determine if Detroit is allowed to restructure – and even shed – its obligations in a Chapter 9 bankruptcy.
“You can expect challenges right out of the box,” said bankruptcy lawyer Douglas Bernstein of Michigan-based Plunkett Cooney.
Unlike General Motors and Chrysler – which were able to restructure under bankruptcy protection in 2009 in a matter of weeks thanks to the backing of the US government – it could take years for Detroit’s case to be resolved, Bernstein warned.
“One of the biggest challenges is that there haven’t been very many municipal bankruptcies in the history of the bankruptcy code, so there’s not a lot of guidance,” Bernstein told AFP.
Snyder listed a host of problems to illustrate why Detroit cannot meet its obligations to its citizens while weighed down by debt.
The homicide rate is the highest in nearly 40 years and, for more than two decades, Detroit has been on the list of the most dangerous cities in the United States.
One of the biggest challenges is that there haven’t been very many municipal bankruptcies in the history of the bankruptcy code, so there’s not a lot of guidance, Bernstein told AFP.
People have to wait an average of 58 minutes for the police to respond to their calls, compared to an average of 11 minutes nationwide.
There are 78,000 abandoned buildings scattered across the city and a lack of funds for maintenance and repairs means only a third of the city’s ambulances work.
The city has been borrowing money to pay its bills for more than a decade, a short-sighted move that further depleted its coffers.
Some 38 cents of every city dollar was going to debt repayment and obligations like pensions, and that was projected to hit 65 cents on the dollar by 2017.
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