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City of Detroit files for Chapter 9 Bankruptcy

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Old July 18th, 2013 (2:42 PM).
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    Given the severe (possibly irreversible) decline of the city of Detroit in the past several decades, I knew a bankruptcy filing would be inevitable.
    From :
    DETROIT (WWJ) - After years of hand wringing over the state of affairs in the rust belt hub that has struggled in recent years perhaps more than any other large city in America, it’s official: Detroit has filed for Chapter 9 bankruptcy protection.

    Motown, the gritty place that pioneered automobiles, modern manufacturing and soul music, now has the largest municipal bankruptcy case in U.S. history.

    The 16-page filing was submitted to federal U.S. Bankruptcy Court Thursday afternoon with no announcement from the city or state.

    Detroit has been struggling, crushed under billions of dollars in debt following decades of mismanagement, population flight and loss of tax revenue. The city lost a quarter-million residents between 2000 and 2010. Detroit now has an estimated 700,000 residents; down from 1.8 million in the 1950s.

    For weeks, emergency manager Kevyn Orr has been working to try to lower the city’s debt as he slashes budgets, works with unions, and make sense of Detroit’s disjointed financial records.

    A city official notably said the federal government should bail out Detroit, though the president has made no indication that’s a possibility.

    Orr’s options were these: File for bankruptcy or cut the biggest bond restructuring deal of all time.

    The latter didn’t happen.

    Said Orr, in a written recommendation hand-delivered Tuesday to Gov. Rick Snyder and state Treasurer Andy Dillon:

    “Based on the current facts and circumstances, I have concluded that no reasonable alternative to rectifying the city’s financial emergency exists other than the confirmation of a plan of adjustment for the city’s debts pursuant to chapter 9 of the bankruptcy code because the city cannot adopt a feasible financial plan that cant satisfactorily rectify the financial emergency outside of a chapter 9 process in a timely manner.” [View a copy of Orr's letter].

    Gov. Snyder on Thursday approved the bankruptcy

    “Only one feasible path offers a way out,” Snyder wrote in a letter to Dillon and Orr.

    “The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,” Snyder said. “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.”

    “Despite Mr. Orr’s best efforts, he has been unable to reach a restructuring plan with the city’s creditors,” Snyder said. “I therefore agree that the only feasible path to a stable and solid Detroit is to file for bankruptcy protection.”.

    According to sources talking to WWJ City Beat Reporter Vickie Thomas, city officials were preparing the filing earlier Thursday. Federal Court spokesman Ron Hansen confirmed the filing shortly after 4 p.m.

    Meantime, one mayoral candidate says Orr’s numbers are not adding up.

    Krystal Crittendon, an attorney for the city, is criticizing the math in Orr’s latest financial report. She said the Washington-based bankruptcy attorney’s numbers do not add up.

    “The whole foundation that brings him here is false,” Crittendon said. “We do not have a $15 [billion] or a $20 billion debt problem. We have less than a $2 billion short-term debt problem that we could manage if we just went out and collected revenues that are owed to the city; stop giving, you know, tax abatement to people who can actually afford to pay taxes.

    Orr was hired by the state in March after a financial emergency was declared in Detroit.

    Following a meeting last month with Wall Street creditors, Orr estimated Detroit’s budget deficit could be at $380 million, and the city’s long-term debt at $20 billion. Creditors are being asked to take about 10 cents on the dollar of what’s owed to them. [VIEW THE PROPOSAL HERE]

    At that time, Orr gave the city a 50-50 chance of avoiding bankruptcy.

    Bankruptcy expert Douglas Bernstein, with West Bloomfield’s Plunkett Cooney Law Firm, said the filing will kick-start a multi-month period where a federal judge and consultants would determine whether Detroit is eligible for Chapter 9 protection.
    See also:

    For those not familiar with Chapter 9, it is a debt restructuring chapter exclusively available to municipalities (Large businesses restructure their debts through Chapter 11, while individuals can restructure through Chapter 13, family farmers and fisherman through Chapter 12, and straight bankruptcy liquidation is Chapter 7.)

    Whether or not this will actually turn things around for Detroit is hard for me to tell. Personally, I think the city should be disincorporated altogether and vacated into townships. With all the corruption in the city government, it's become plain obvious now that the city will likely never return to viability again. Many have said that a bankruptcy filing would only make things worse as the case goes through court.
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    Old July 18th, 2013 (4:36 PM).
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    I am gonna be totally honest right now, I always thought it was a stereotype, much like how "black people steal" is. I never knew that they really were that messed up…

    Though knowing their residents live in a city of great legacy, the ones remaining should probably take this as a call to action and not let any remaining buildings become artwork rather than places to do stuff in.
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    Old July 18th, 2013 (5:14 PM).
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      I am not suprised by this, bankruptcy has been on the table for the past five years.

      The issue has been the relocation of the affluent (mainly white) populations to the outskirts of Detroit, and subsequently, to far-distanced suburbs for fear that during segregation that affluent white children would have to share the classroom with subhuman black children along with the failing/dwindling of the auto-industry. Thus, the consumer spending within the city during the 1960's onward decreased as jobs and workers went outside of the city. This only aggravated poverty in these areas for families that could not afford to relocate, black populations were not able to finance a move and were not able to change their financial circumstances in the city that was losing opportunities and school funding given that once equal rights legislation became more prominent there existed few opportunities. Though, this does apply to many impoverished white families which were also caught up into the cycle of poverty and lack of resources to break out of the cycle, there still remains a disproportionate amount of black Americans that were "left behind" . With poverty there also exists higher crime and higher costs of policing and social welfare programs. Additionally, the auto industries abroad emerged into the world market, and thus aggravating the situation, since funding was reliant on that single commodity, as was Egypt reliant upon Egyptian cotton, when that commodity became less profitable and there existed no resource to fallback upon. The bankruptcy might have been the only way for the state of Michigan to cut their losses and manage a revitalization of the city given the corruption and reckless spending by city government. This year the mayor was found guilty of corruption charges.

      The state and constituents have been trying to make changes in leadership, since the handling of Detroit affects the entire state. The governor's push for bankruptcy and usurpation of power from the current leadership may be the only chance of helping those in the state of Michigan and the residents of Detroit.

      If you haven't been in Detroit, you have no idea. It is extremely devastating to see the amount of families and children living on the street. The leadership of Detroit has failed these families and the black community.
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      Old July 18th, 2013 (6:31 PM). Edited July 19th, 2013 by Livewire.
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      Given that our economy has shifted from manufacturing, it was only a matter of time before Detroit and the Rust Belt eventually faded. It's been looming for awhile now.

      I've seen/been a part of something similar here with my own hometown, Dayton, Ohio. The affluent white middle/upper-middle class families left for the suburb areas, like mine, or totally relocated south to the Cincinnati area, leaving a decaying city behind rife with disenfranchisement, poverty and crime. It's sad to see, really. Dayton at one point was home to the arts and high culture, but now it's essentially kept afloat by the University of Dayton and some last vestiges of wealth. It's eerily similar to Detroit's situation.
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      Old July 19th, 2013 (10:43 AM).
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      So what happens to the day to day lives of people when their city files for bankruptcy? What changes for them and what prospects does the city have that it didn't before bankruptcy?
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      Old July 19th, 2013 (10:49 AM).
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        Wow the "city of motorways" realy has gone haywire huh? :/ I hope that things would turn out good...but I fear for worst. My sympathies to people of Detroit... :(

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        Old July 19th, 2013 (6:29 PM).
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          I think we've all been waiting for it. They kept having a "plan" but I'm pretty sure everyone knew that was not reliable. I don't think the city will ever be what it once was, I'm not sure if it can. More than half the city is in ruin, no one has jobs, too much's not a pretty site and it's so sad.
          I really don't know what's going to happen for the people. Cops that work for the city are probably going to be screwed (unless cops all work for the state? I'm not sure.) Retirees may also be out of luck, especially if they worked for the city. Idk. It's really terrible and sad to see.
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          Old July 19th, 2013 (6:34 PM).
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          Detroit is an awful city. The population is actually in decline as people try to move away it, that's how horrible it is. About the only reason I would ever go near it is to watch the Red Wings.

          Unfortunately, a lot of those people moving away are part of what made it so bad, and they're moving to where I live. Awesome. Grand Rapids has gotten a bit worse in the past few years and I'm pretty sure that's the cause.
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          Old July 20th, 2013 (9:58 PM).
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          Inb4 Obama blames Romney for this. He said that Romney would make Detroit go bankrupt throughout the whole 2012 campaign!
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          Old July 21st, 2013 (2:02 AM).
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          Originally Posted by FreakyLocz14 View Post
          Inb4 Obama blames Romney for this. He said that Romney would make Detroit go bankrupt throughout the whole 2012 campaign!
          No, Romney said it himself in a NYTimes op-ed he titled "Let Detroit Go Bankrupt". Obama just stated the fact of what Romney had said.

          Certainly, the city needs a complete reform, since it's pretty clear that it will never be the 2-million people megalopolis it once was, so all structures must be downsized into proportion. The problem will be the social services until then :\
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          Old July 21st, 2013 (3:32 PM). Edited July 21st, 2013 by TRIFORCE89.
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          Originally Posted by Went View Post
          Certainly, the city needs a complete reform, since it's pretty clear that it will never be the 2-million people megalopolis it once was, so all structures must be downsized into proportion. The problem will be the social services until then :\
          They've said services should not be disrupted. I don't entirely believe that. When two-third of your budget goes to paying retirement packages, you've clearly done something wrong along the way. They need restructure and get some quality city managers and city builders on board. Really need to rethink how they do things and make things sustainable. They had too many eggs in one basket


          Originally Posted by FreakyLocz14 View Post
          Inb4 Obama blames Romney for this. He said that Romney would make Detroit go bankrupt throughout the whole 2012 campaign!
          Originally Posted by Went View Post
          No, Romney said it himself in a NYTimes op-ed he titled "Let Detroit Go Bankrupt". Obama just stated the fact of what Romney had said.
          He didn't write the title, and the article is just about the auto industry alone
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          Old July 23rd, 2013 (9:52 AM).
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            Detroit has been planning on filing chapter 9 for a while now and the government of Detroit has known this and has willingly let the city decline to the point it is now. The auto industry isnt the reason they are filing. Chevy and Ford r thriving and Dodge isnt doing to bad.
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            Old July 23rd, 2013 (8:22 PM).
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              I don't have a lot to say to this except that I am not surprised at all. Detroit has been floundering for ages now, and it was literally only a matter of time. I live less than an hour away from the D and despite it being the biggest city in Michigan it has no tourist appeal at all. I only go there maybe once a year, at best. It's pretty sad that the suburbs have a lot more going for them on a recreational level than the city.

              I worked at a mall that was an hour drive from the Canadian border, yet most of our out-of-town customers were Canadians. I talked to a few at work and they drove right through Detroit to get to the mall, as it was more of a point of interest than the entire city of Detroit, apparently.
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