Detroit files for bankruptcy

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DETROIT -- Detroit became the largest city in U.S. history to file for bankruptcy Thursday, as the state-appointed emergency manager filed for Chapter 9 protection.

Kevin Orr, a bankruptcy expert who was hired by the state in March to lead Detroit out of a fiscal free fall, made the filing in federal bankruptcy court.

A number of factors, most notably steep falls in population and tax base, have been blamed for Detroit's tumble toward insolvency. The city lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000.

Much of the middle class and scores of businesses have fled Detroit, taking their tax dollars with them.

In recent months, the city has relied on state-backed bond money to meet payroll for its 10,000 employees.

Orr was unable to persuade a host of creditors and the city's union and pension boards to take pennies on the dollar to help facilitate the city's massive financial restructuring.

If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

"Only one feasible path offers a way out," Gov. Rick Snyder said in a letter to Orr and state Treasurer Andy Dillon, approving the bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency.

"The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote.

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"The city's creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep," he added. "The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

Detroit's budget deficit is believed to be more than $380 million. -- AP

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