As the city and state have failed to make headway over specific reforms, Detroit’s projected deficit is growing. City officials say that bankruptcy is the last resort if the city and state do not come to an agreement. It is estimated that the city will sacrifice a $30 million in state bond funding. Without the bond, the city will be at a $46 million deficit by next May. That kind of deficit is enough for bankruptcy to become the only option. If Detroit files for Chapter 9 bankruptcy, it will be the largest city in history to ever file for bankruptcy protection.
A deep political divide between city leaders in Detroit would make the bankruptcy process even more difficult. Municipalities filing for bankruptcy must have the state’s approval to do so. There are major differences between a company filing for bankruptcy and a municipality filing for bankruptcy. When a city files for bankruptcy, it is simply looking for ways to reorganize debts. Many city and state officials believe bankruptcy is not yet an option because it would mean giving up.
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