DETROIT — The city of Detroit officially became the largest municipality in U.S. history Tuesday to enter Chapter 9 bankruptcy after a judge declared it met the specific legal criteria required to receive protection from its creditors.

The landmark ruling ends more than four months of uncertainty over the fate of the case and sets the stage for a fierce clash over how to slash an estimated $18 billion in debt and long-term liabilities that have hampered Detroit from attacking pervasive blight and violent crime.
“It is indeed a momentous day,” U.S. Bankruptcy Judge Steven Rhodes said at the end of a 90-minute summary of his ruling. “We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”
In a surprise decision Tuesday  morning, Rhodes also said he will allow pension cuts in Detroit’s bankruptcy. He emphasized that he won’t necessarily agree to pension cuts in the city’s final reorganization plan unless the entire plan is fair and equitable.
“Resolving this issue now will likely expedite the resolution of this bankruptcy case,” he said.
Rhodes’ verbal ruling, which will proceed a 140-page written opinion, gave Detroit the green light to enter Chapter 9 bankruptcy.
“The court finds that Detroit was and is insolvent,” he said. “The court finds that the city was generally not paying its debts as they became due.”
Rhodes said bankruptcy was a “foregone conclusion for a very long time. Cities often wait longer to file for bankruptcy than they should have, and the city of Detroit was no exception.”
Rhodes said he will not issue a stay on the bankruptcy, meaning the case will proceed.  (read more)

FLASHBACK DURING 2012 DEBATES

October 2012: “Just a few years ago, the auto industry wasn’t just struggling – it was flatlining,” Mr. Obama said. “GM and Chrysler were on the verge of collapse. Suppliers and distributors were at risk of going under. More than a million jobs across the country were on the line – and not just auto jobs, but the jobs of teachers, small business owners, and everyone in communities that depend on this great American industry.”
His administration, he argues, “refused to throw in the towel and do nothing. We refused to let Detroit go bankrupt. We bet on American workers and American ingenuity, and three years later, that bet is paying off in a big way.”  ~Obama