Detroit declares bankruptcy

Detroit, Motown, Motor City, has filed for Chapter 9 bankruptcy protection, effectively declaring the city insolvent. In doing so it is easily the largest city in the US to declare itself bankrupt.

After many years battling high debts, falling income, declining population, high crime, reduced services and a tortured cityscape the city’s emergency manager, Kevyn Orr, has declared bankruptcy in order to stave off a rash of lawsuits being filed by retirees from city.

The retirees hold about half of Detroit’s approximately US$18 billion debt bill in the form of promised pensions and health benefits; the other half is held by bond holders. Bond holders, who were offered 10 cents in the dollar or less, and retirees, who were told that their retirement benefits would be severely cut, both opposed debt reduction schemes that were previously offered to them.

According to reports, the city current has 78,000 abandoned buildings are a result of massive depopulation — the city now has 63% less people living in it than in 1950. Just before bankruptcy it was spending 38% of its income servicing its debt and, as a result, services offered by Detroit are poor. For instance, violent crime is 5 times higher than the national average, 40% of street lights aren’t operating and callers to the police wait an average for 58minutes for a response.

Sources: The Guardian, Business Insider

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Derek Fung

Derek Fung

Derek has a lifelong love for all things automotive, from the dullest Camry to record shattering Bugattis. Prior to starting up Between the Axles he was a reviewer for CNET Australia and the founding editor of its Car Technology channel. [Read more]