Detroit is bankrupt. Michigan Governor Rick Snyder says he authorized the city's emergency manager to seek federal bankruptcy protection.
The emergency manager of the Motor City filed for Chapter 9 bankruptcy protection today. It's the largest U.S. city to do so. The city has around $18 billion of debt. The filing will give the city time to fend off creditors and restructure its finances.
Detroit's financial future can be seen somewhat in the previous municipal bankruptcies filed by the California cities of Stockton and San Bernardino.
City officials in both California communities say filing for bankruptcy in recent years led to hardball negotiations with numerous entities as the cities worked to get out from under their financial debt.
Millions of dollars will likely have to be paid in attorneys fees alone as Detroit will ultimately be pulled into court by some creditors looking to get the money they are owed.
Stockton officials ultimately gained some savings by ending contributions to retiree health care and negotiating new contracts with police officers, firefighters and other city employees.
Detroit leaders may also have to consider potential tax increases as part of their exit plan, much as Stockton has put forth a sales tax increase on the November ballot to help pay down creditors.
Stockton officials declined to comment.