On July 18, the city of Detroit, Michigan filed the largest municipal bankruptcy in US history. Recent reports estimate Detroit’s total debt at over $18 billion, with unsecured debts over $12 billion. In an internet video statement, Michigan Governor Rick Snyder explained his decision to authorize Detroit’s bankruptcy filing, “From a financial point of view, let me be blunt, Detroit is broke,”
Detroit has suffered a myriad of financial problems during its 60 year decline. Once the nation’s fourth-largest city, the population of Detroit has dwindled from nearly 2 million inhabitants to around 700,000. Ultimately, fewer residents mean fewer tax dollars for the city. Detroit is unable to repay investors or fund the pensions of city workers. The city faces strong resistance from creditors and unions in its path to recovery. The day after filing one Michigan county judge declared the bankruptcy filing unconstitutional, which is the first of many legal battles during this process.
Detroit’s bankruptcy filing comes shortly after a proposal by Jefferson County, Alabama, to exit bankruptcy. Jefferson County, which includes the city of Birmingham, filed bankruptcy in 2011. This proposal, which must be approved by the bankruptcy court and creditors, includes concessions by major creditors and debt refinancing. If approved, Jefferson County is expected to exit bankruptcy by December.
Detroit’s problems are similar to many consumer bankruptcy cases. When a family loses income through a job loss or layoff, bills go unpaid. Unpaid debts cause collection calls, lawsuits, repossessions, utility interruptions, and even eviction. The federal bankruptcy process can stop these collection actions and allow breathing room to restructure finances. In consumer cases, that can mean discharging debt or paying pennies on the dollar.
If you are struggling with debt, discuss your financial condition with an experienced bankruptcy attorney. Bankruptcy has helped millions find their way to financial health, including Donald Trump, Henry Ford, General Motors, and Orange County, California. Call today and see how bankruptcy can help you.