Governor Rick Snyder authorized the move to seek federal bankruptcy protection for Detroit.
Detroit Emergency Manager Kevyn Orr had to get the approval of the governor to move forward with the filing.
Governor Snyder says it was the only viable option. “The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future,” the governor said. “This is a difficult step, but the only viable option to address a problem that has been six decades in the making.”
According to Orr and Governor Snyder, Chapter 9 bankruptcy protects the city from creditors while their debts are resolved in bankruptcy court. “The simple fact is Detroit is in a financial crisis. The city is insolvent and has been borrowing money to pay its bills for nearly a decade. Bankruptcy is the only feasible option to fix the city’s finances and do what is right for the 700,000 people of Detroit,” Snyder said.
Detroit’s deficit is $18 billion, of which $11 billion is unsecured including the pensions and retiree health care for 30,000 Detroit City employees.
The White House even issued a statement following the filing that indicated President Obama would be monitoring the situation closely.
Reactions have been mixed among Detroit residents hearing about the news.